Question 1

Monopolistically competitive firms can achieve product differentiation through:

Accepted Answer

A)   creating a truly different product.
B)   creating the perception of differences in their product.
C)   creating a product that cannot be easily substituted with a rival's product.
D)   All of these statements are true.E) All of the above
F) C) and D)

Question 2

When one strategy is always the best for a player to choose,regardless of what other players do,it is called:

Accepted Answer

A)   a dominant strategy.
B)   a Nash equilibrium.
C)   collusion.
D)   the prisoner's dilemma.E) A) and B)
F) A) and C)

Question 3

Competition between oligopolists drives:

Accepted Answer

A)   price and profits down to below the monopoly level.
B)   price and profits down to the perfect competition level.
C)   some firms out until the market becomes a monopoly.
D)   collusion to happen frequently.E) None of the above
F) A) and B)

Question 4

Spending a lot on advertising is a credible signal because it:

Accepted Answer

A)   conveys the firm's confidence in the high quality of their product.
B)   persuades the consumer to perceive high quality of a product, even if it doesn't exist.
C)   conveys the firm's confidence in its ability to convince the consumer to buy.
D)   None of these explains why advertising can be a credible signal.E) None of the above
F) All of the above

Question 5

The act of firms working together to make decisions about price and quantity is called:

Accepted Answer

A)   collusion.
B)   price discrimination.
C)   bulk ordering.
D)   artificial competition.E) C) and D)
F) A) and C) A

Question 6

Knowing that Coke controls 80 percent of the cola market and Pepsi controls 20 percent,we can conclude the cola market is:

Accepted Answer

A)   perfectly competitive.
B)   monopolistically competitive.
C)   an oligopoly.
D)   a monopoly.E) B) and C)
F) All of the above

Question 7

Monopolistic competition describes a market with:

Accepted Answer

A)   few firms that sell goods and services and some barriers to entry.
B)   many firms that sell goods and services that are standardized.
C)   many firms that sell goods and services that are similar, but slightly different.
D)   few firms that sell goods and services that are standardized.E) C) and D)
F) B) and C)

Question 8

If a monopolistically competitive firm is earning profits in the short run:

Accepted Answer

A)   the entry of competing firms will shift the firm's demand to the right.
B)   the entry of competing firms will shift the firm's demand to the left.
C)   the entry of competing firms will cause price to drop, but not affect the firm's demand curve.
D)   the entry of competing firms will cause price to rise, but not affect the firm's demand curve.E) A) and D)
F) None of the above

Question 9

If a firm in a monopolistically competitive market has a demand curve shifting to the right,it could be that:

Accepted Answer

A)   negative economic profits are being earned.
B)   firms are leaving the market.
C)   the selling price is less than the average total cost of the firm.
D)   All of these statements are true.E) None of the above
F) B) and C)

Question 10

If a firm in a monopolistically competitive market has a demand curve 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 average total cost of the firm.
D)   All of these statements are true.E) All of the above
F) A) and B)

Question 11

These are the cost and revenue curves associated with a monopolistically competitive firm.  According to the graph shown,the monopolistically competitive firm will produce:

Accepted Answer

A)  where MR = MC and will charge according to ATC.
B)  where MR = MC and will charge according to D.
C)  where D = MC and will charge according to MR.
D)  where D = MC and will charge according to ATC.E) A) and D)
F) A) and C)

Question 12

In practice,monopolistically competitive markets are:

Accepted Answer

A)   very rare.
B)   very common.
C)   virtually nonexistent.
D)   the only type of market that truly exists.E) A) and B)
F) None of the above

Question 13

The process of entry and exit into a monopolistically competitive market continues until:

Accepted Answer

A)   profits are zero.
B)   long-run equilibrium is reached.
C)   price is equal to average total cost.
D)   All of these statements are true.E) A) and B)
F) A) and C) D

Question 14

If we were to compare the monopolistically competitive firm's long-run outcome to that of a perfectly competitive one,we would conclude that the monopolistically competitive firm:

Accepted Answer

A)   creates less consumer surplus.
B)   produces more output.
C)   earns the same profit as a perfectly competitive firm.
D)   All of these statements are true.E) C) and D)
F) A) and C)

Question 15

In practice,oligopolistic markets are:

Accepted Answer

A)   fairly common.
B)   very rare.
C)   forbidden by the government.
D)   usually protected by the government.E) A) and B)
F) A) and C)

Question 16

In the long run,firms in a monopolistically competitive market operate at:

Accepted Answer

A)   an efficient scale.
B)   a less-than-efficient scale.
C)   a more-than-efficient scale.
D)   Any of these could be true, depending on the individual firm.E) None of the above
F) All of the above

Question 17

Spending a lot on advertising:

Accepted Answer

A)   can act as a credible signal to consumers of high-quality products.
B)   can act as a credible signal to producers to create high quality substitutes.
C)   does not serve as a credible signal to consumers, since any producer can do it.
D)   can act as a credible signal to consumers of low-quality products.E) C) and D)
F) A) and D)

Question 18

In the short run,monopolistically competitive firms:

Accepted Answer

A)   can earn positive economic profits by acting like a monopolist.
B)   can earn positive economic profits by acting like a perfectly competitive firm.
C)   will earn zero economic profits by acting like a monopolist.
D)   will earn zero economic profits by acting like a perfectly competitive firm.E) All of the above
F) C) and D)

Question 19

Regulating a monopolistically competitive market:

Accepted Answer

A)   is easier than regulating a monopoly.
B)   is more difficult than regulating a monopoly.
C)   is very common in the U.S. today.
D)   has grown over the past 50 years.E) B) and D)
F) C) and D) B

Question 20

For the monopolistically competitive firm,the demand curve it faces will be steeper the:

Accepted Answer

A)   more easily the good can be substituted.
B)   less easily the good can be substituted.
C)   more complement goods are available.
D)   less complement goods are available.E) B) and C)
F) None of the above

Exam 15: Monopolistic Competition and Oligopoly

Monopolistically competitive firms can achieve product differentiation through:

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When one strategy is always the best for a player to choose,regardless of what other players do,it is called:

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Competition between oligopolists drives:

Correct AnswerverifiedShow Answer

Spending a lot on advertising is a credible signal because it:

Correct AnswerverifiedShow Answer

The act of firms working together to make decisions about price and quantity is called:

Correct AnswerverifiedA

Knowing that Coke controls 80 percent of the cola market and Pepsi controls 20 percent,we can conclude the cola market is:

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Monopolistic competition describes a market with:

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If a monopolistically competitive firm is earning profits in the short run:

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If a firm in a monopolistically competitive market has a demand curve shifting to the right,it could be that:

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

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These are the cost and revenue curves associated with a monopolistically competitive firm. According to the graph shown,the monopolistically competitive firm will produce:

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In practice,monopolistically competitive markets are:

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The process of entry and exit into a monopolistically competitive market continues until:

Correct AnswerverifiedD

If we were to compare the monopolistically competitive firm's long-run outcome to that of a perfectly competitive one,we would conclude that the monopolistically competitive firm:

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In practice,oligopolistic markets are:

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In the long run,firms in a monopolistically competitive market operate at:

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Spending a lot on advertising:

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In the short run,monopolistically competitive firms:

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Regulating a monopolistically competitive market:

Correct AnswerverifiedB

For the monopolistically competitive firm,the demand curve it faces will be steeper the:

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A

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D

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B

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