Question 1

Firms are incentivized to enter a monopolistically competitive market if:

Accepted Answer

A)  positive profits are being earned and the price is below marginal cost.
B)  zero profits are being made and the entering firms can duplicate the product exactly.
C)  positive profits are being earned and the entering firms can create a similar product.
D)  zero profits are being made and the entering firms can create a similar product.E) B) and C)
F) C) and D)

Question 2

If the demand curve for a firm in a monopolistically competitive market is shifting to the right, it is likely that:

Accepted Answer

A)  positive economic profits are being earned.
B)  firms are entering the market.
C)  the selling price is less than the firm's average total cost.
D)  All of these will cause the demand curve to shift to the right.E) None of the above
F) A) and D) C

Question 3

If a government were to regulate a monopolistically competitive market by setting a single price, which of the following would result from that action?

Accepted Answer

A)  Less product variety
B)  Higher prices
C)  Less output supplied to the market
D)  All of these are true.E) C) and D)
F) B) and C)

Question 4

A company that spends a lot of money on advertising is sending a credible signal because this act:

Accepted Answer

A)  conveys the company's confidence in the quality of its product.
B)  persuades the consumer to perceive a product as high quality, even if it is not.
C)  conveys the company's confidence in its ability to convince the consumer to buy.
D)  None of these explains why advertising can be a credible signal.E) A) and B)
F) A) and C) A

Question 5

Two firms in an oligopolistic market, Firm A and Firm B, face the demand schedule shown.

If the two firms agree to act like a monopolist and split the market, they will each produce 150 units at a price of $50, creating a total of 300 units in the market, and the price will be $50. If Firm B decides to increase production by 50 units, which of the following statements is true?If Firm A also increases production by 50 units, price will decrease to $30.If Firm A continues producing 150 units, both firms' revenues will increase.If Firm A also increases production by 50 units, both firms' revenues will fall.

Accepted Answer

A)  I only
B)  II and III only
C)  I and III only
D)  I, II, and IIIE) C) and D)
F) A) and B)

Question 6

The game matrix shown displays the payoffs associated with two firms: Firm 1 and Firm 2. These firms are in an oligopoly and they can choose to produce either a high quantity or a low quantity.  What is the Nash Equilibrium for this game?

Accepted Answer

A)  Both firms choose to produce a high quantity.
B)  Both firms choose to produce a low quantity.
C)  Firm 1 chooses to produce a high quantity and Firm 2 chooses to produce a low quantity.
D)  Firm 1 chooses to produce a low quantity and Firm 2 chooses to produce a high quantity.E) None of the above
F) A) and D)

Question 7

A market that consists of only a few large firms is most likely a(n) :

Accepted Answer

A)  monopoly.
B)  perfectly competitive market.
C)  monopolistically competitive market.
D)  oligopoly.E) A) and B)
F) B) and D)

Question 8

An oligopoly with two firms is known as:

Accepted Answer

A)  a duopoly.
B)  a two-opoly.
C)  a double market.
D)  duopolistic competition.E) All of the above
F) B) and D)

Question 9

If a monopolistically competitive firm's demand curve is shifting to the left, it will stop shifting when:

Accepted Answer

A)  price is equal to the firm's marginal cost.
B)  price is equal to the firm's average total cost.
C)  price is equal to that of a perfectly competitive firm.
D)  there is no deadweight loss in the market.E) None of the above
F) A) and B)

Question 10

Like the monopolist, the monopolistically competitive firm:

Accepted Answer

A)  faces a downward sloping demand curve.
B)  is a price taker.
C)  sets price where marginal cost equals marginal revenue, ignoring the demand curve.
D)  All of these are true.E) A) and B)
F) A) and C)

Question 11

The graph shown displays the cost and revenue curves associated with a monopolistically competitive firm.  This firm will produce _______ units and charge a price of _______.

Accepted Answer

A)  60; $45
B)  80; $30
C)  80; $60
D)  90; $40E) A) and B)
F) All of the above

Question 12

What is the primary difference between a monopolistically competitive firm and a monopoly?

Accepted Answer

A)  The ability for competition to enter the market in the long run.
B)  The ability for competition to enter the market in the short run.
C)  Only the monopolistically competitive firm is a price taker.
D)  Only the monopolist can set price equal to demand.E) A) and D)
F) B) and C)

Question 13

When a Nash equilibrium is reached:

Accepted Answer

A)  the outcome will only change if the "lead" player changes strategy.
B)  no one has an incentive to break the equilibrium by changing strategy.
C)  it must be true that all players have a dominant strategy.
D)  None of these is true.E) All of the above
F) A) and D) B

Question 14

A company with a strong brand identity:

Accepted Answer

A)  conveys an implicit guarantee of its product's quality to customers.
B)  promises consistency in its products to customers.
C)  can perpetuate false perceptions of quality or product differences.
D)  All of these are true.E) B) and C)
F) None of the above

Question 15

Innovation gives firms in a monopolistically competitive market the opportunity to:

Accepted Answer

A)  quickly exit the industry.
B)  avoid spending money on research and development.
C)  earn positive economic profits.
D)  increase consumer surplus.E) A) and B)
F) A) and C)

Question 16

For the monopolistically competitive firm, the steepness of the demand curve depends on:

Accepted Answer

A)  the steepness of the marginal cost curve.
B)  the number of consumers in the market.
C)  the availability of close substitutes.
D)  None of these are correct.E) All of the above
F) C) and D)

Question 17

The graph shown displays the cost and revenue curves associated with a monopolistically competitive firm.  If the firm produces Q2 and charges P2, then:

Accepted Answer

A)  economic profit will be negative.
B)  deadweight loss will be positive.
C)  producer surplus will be zero.
D)  profits will be maximized.E) A) and D)
F) B) and C)

Question 18

The graph shown displays the cost and revenue curves associated with a monopolistically competitive firm.  How much profit does this firm earn?

Accepted Answer

A)  $360
B)  $450
C)  $200
D)  $250E) All of the above
F) B) and C)

Question 19

The graph shown displays the cost and revenue curves associated with a monopolistically competitive firm.  If the firm is producing Q1 and charging P3, it is likely:

Accepted Answer

A)  earning positive economic profits.
B)  earning negative economic profits.
C)  in long run equilibrium.
D)  All of these are true.E) A) and B)
F) A) and C)

Question 20

Companies that support advertising often believe that it:

Accepted Answer

A)  is purely an informational tool.
B)  will reduce competition in their market.
C)  highlights the substitutability of products.
D)  can persuade customers that products are more different than they really are.E) B) and C)
F) B) and D)

Exam 15: Monopolistic Competition and Oligopoly

Firms are incentivized to enter a monopolistically competitive market if:

Correct Answer
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If the demand curve for a firm in a monopolistically competitive market is shifting to the right, it is likely that:

Correct Answer
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C

If a government were to regulate a monopolistically competitive market by setting a single price, which of the following would result from that action?

Correct Answer
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A company that spends a lot of money on advertising is sending a credible signal because this act:

Correct Answer
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A

Correct Answer
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The game matrix shown displays the payoffs associated with two firms: Firm 1 and Firm 2. These firms are in an oligopoly and they can choose to produce either a high quantity or a low quantity. What is the Nash Equilibrium for this game?

Correct Answer
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A market that consists of only a few large firms is most likely a(n) :

Correct Answer
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An oligopoly with two firms is known as:

Correct Answer
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If a monopolistically competitive firm's demand curve is shifting to the left, it will stop shifting when:

Correct Answer
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Like the monopolist, the monopolistically competitive firm:

Correct Answer
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The graph shown displays the cost and revenue curves associated with a monopolistically competitive firm. This firm will produce _ units and charge a price of _.

Correct Answer
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What is the primary difference between a monopolistically competitive firm and a monopoly?

Correct Answer
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When a Nash equilibrium is reached:

Correct Answer
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B

A company with a strong brand identity:

Correct Answer
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Innovation gives firms in a monopolistically competitive market the opportunity to:

Correct Answer
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For the monopolistically competitive firm, the steepness of the demand curve depends on:

Correct Answer
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The graph shown displays the cost and revenue curves associated with a monopolistically competitive firm. If the firm produces Q2 and charges P2, then:

Correct Answer
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The graph shown displays the cost and revenue curves associated with a monopolistically competitive firm. How much profit does this firm earn?

Correct Answer
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The graph shown displays the cost and revenue curves associated with a monopolistically competitive firm. If the firm is producing Q1 and charging P3, it is likely:

Correct Answer
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Companies that support advertising often believe that it:

Correct Answer
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Exam 15: Monopolistic Competition and Oligopoly

Firms are incentivized to enter a monopolistically competitive market if:

Correct AnswerverifiedShow Answer

If the demand curve for a firm in a monopolistically competitive market is shifting to the right, it is likely that:

Correct AnswerverifiedC

If a government were to regulate a monopolistically competitive market by setting a single price, which of the following would result from that action?

Correct AnswerverifiedShow Answer

A company that spends a lot of money on advertising is sending a credible signal because this act:

Correct AnswerverifiedA

Correct AnswerverifiedShow Answer

The game matrix shown displays the payoffs associated with two firms: Firm 1 and Firm 2. These firms are in an oligopoly and they can choose to produce either a high quantity or a low quantity. What is the Nash Equilibrium for this game?

Correct AnswerverifiedShow Answer

A market that consists of only a few large firms is most likely a(n) :

Correct AnswerverifiedShow Answer

An oligopoly with two firms is known as:

Correct AnswerverifiedShow Answer

If a monopolistically competitive firm's demand curve is shifting to the left, it will stop shifting when:

Correct AnswerverifiedShow Answer

Like the monopolist, the monopolistically competitive firm:

Correct AnswerverifiedShow Answer

The graph shown displays the cost and revenue curves associated with a monopolistically competitive firm. This firm will produce _______ units and charge a price of _______.

Correct AnswerverifiedShow Answer

What is the primary difference between a monopolistically competitive firm and a monopoly?

Correct AnswerverifiedShow Answer

When a Nash equilibrium is reached:

Correct AnswerverifiedB

A company with a strong brand identity:

Correct AnswerverifiedShow Answer

Innovation gives firms in a monopolistically competitive market the opportunity to:

Correct AnswerverifiedShow Answer

For the monopolistically competitive firm, the steepness of the demand curve depends on:

Correct AnswerverifiedShow Answer

The graph shown displays the cost and revenue curves associated with a monopolistically competitive firm. If the firm produces Q2 and charges P2, then:

Correct AnswerverifiedShow Answer

The graph shown displays the cost and revenue curves associated with a monopolistically competitive firm. How much profit does this firm earn?

Correct AnswerverifiedShow Answer

The graph shown displays the cost and revenue curves associated with a monopolistically competitive firm. If the firm is producing Q1 and charging P3, it is likely:

Correct AnswerverifiedShow Answer

Companies that support advertising often believe that it:

Correct AnswerverifiedShow Answer

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C

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A

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The graph shown displays the cost and revenue curves associated with a monopolistically competitive firm. This firm will produce _ units and charge a price of _.

Correct Answer
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B

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