Question 1

A positive effect of advertising for society is that it:

Accepted Answer

A)   increases market share for the dominant firm in the industry.
B)   provides useful information to reduce search cost for consumers.
C)   raises barriers to entry into the industry and protects existing firms.
D)   creates price leadership and gives firms guidance in dealing with rivals.E) B) and C)
F) A) and C)

Question 2

The marginal cost curve intersects the average total cost curve in monopolistic competition:

Accepted Answer

A)   at the market price.
B)   at the minimum average total cost.
C)   to the left of the minimum average total cost.
D)   to the right of the minimum average total cost.E) A) and C)
F) A) and D)

Question 3

Which industry would be the best example of an oligopoly?

Accepted Answer

A)   Steel
B)   Electricity
C)   Fast food
D)   Retail clothingE) B) and D)
F) A) and C)

Question 4

Refer to the above graph.A successful advertising campaign by a monopolistically competitive firm will cause the demand curve for that firm to shift from:

Accepted Answer

A)   A to B and become more elastic.
B)   A to B and become less elastic.
C)   B to A and become more elastic.
D)   B to A and become less elastic.E) B) and C)
F) A) and D)

Question 5

Answer the next question based on the following payoff matrix for a duopoly.The numbers indicate the profit in thousands of dollars for a high-price or a low-price strategy  Refer to the above payoff matrix.Assume that firm Y adopts a low-price strategy while firm X maintains a high-price strategy.Compared to the results from a high-price strategy for both firms,firm Y will now:

Accepted Answer

A)   gain $100,000 in profit and firm X will lose $150,000 in profit.
B)   gain $150,000 in profit and firm X will lose $100,000 in profit.
C)   gain $525,000 in profit and firm X will lose $275,000 in profit.
D)   lose $150,000 in profit and firm X will gain $150,000 in profit.E) C) and D)
F) B) and C)

Question 6

1 to MC2,the firm will charge: A)  a higher price and total revenue will increase. B)  the same price and sell more output;total revenue will increase. C)  the same price and sell the same amount of output;total revenue will remain the same. D)  a higher price and sell less output;it can't be determined whether total revenue will increase." class="answers-bank-image d-inline" rel="preload" > On the above graph,if the oligopolist's MC curve shifts from MC1 to MC2,the firm will charge:

Accepted Answer

A)   a higher price and total revenue will increase.
B)   the same price and sell more output;total revenue will increase.
C)   the same price and sell the same amount of output;total revenue will remain the same.
D)   a higher price and sell less output;it can't be determined whether total revenue will increase.E) A) and B)
F) A) and C)

Question 7

A monopolistically competitive firm in the short run is producing where price is $3.00 and marginal cost is $1.50.To maximize profits:

Accepted Answer

A)   the firm should continue to produce this quantity.
B)   the firm should increase output and decrease price.
C)   the firm should decrease output and increase price.
D)   the firm should produce the level of output where marginal revenue is $1.50.E) A) and C)
F) A) and B)

Question 8

In long-run equilibrium,a monopolistically competitive firm achieves optimal productive efficiency but not optimal allocative efficiency.

Accepted Answer

A) True 
 B)False

Question 9

Refer to the above graph.This monopolistically competitive firm is:

Accepted Answer

A)   suffering an economic loss.
B)   earning an economic profit.
C)   allocatively and productively efficient.
D)   neither allocatively nor productively efficient.E) None of the above
F) A) and B)

Question 10

Monopolistic competitors have some control over the price of their products.

Accepted Answer

A) True 
 B)False

Question 11

Which constitutes an obstacle to collusion among oligopolists?

Accepted Answer

A)   A standardized product
B)   A large number of firms
C)   Prosperous economic conditions
D)   Trademarks and copyrightsE) B) and C)
F) A) and C)

Question 12

Which would be characteristic of monopolistic competition?

Accepted Answer

A)   A potential for price-fixing through collusion
B)   Relatively small market share for each firm
C)   Mutual interdependence among the few firms
D)   Product standardizationE) All of the above
F) A) and B)

Question 13

The strategy of establishing a price that prevents the entry of new firms is called:

Accepted Answer

A)   a price war.
B)   limit pricing.
C)   price leadership.
D)   setting a profit-maximizing price.E) All of the above
F) C) and D)

Question 14

Which would be a qualification to the view that oligopoly is allocatively and productively inefficient?

Accepted Answer

A)   Less foreign competition has stimulated more price competition in oligopolies.
B)   Oligopolies are less technologically competitive so they lose market share.
C)   Oligopolies may purposely keep prices below short-run profit-maximizing levels to bolster barriers to entry.
D)   The more collusive practices of oligopolies lead to more profit-sharing among firms in the industry.E) A) and B)
F) A) and C)

Question 15

Which would make it easier to maintain an effective collusive agreement in a cartel?

Accepted Answer

A)   The emergence of a number of potential entrant firms
B)   A decrease in the elasticity of demand for the cartel's product
C)   An increase in the number of substitutes for products produced by the cartel
D)   A new method of pricing that makes it more difficult for firms in the cartel to determine the prices at which other cartel members are selling their productE) C) and D)
F) A) and B)

Question 16

Refer to the above graph of the representative firm in monopolistic competition.Marginal revenue and marginal cost intersect at point:

Accepted Answer

A)   a.
B)   b.
C)   c.
D)   d.E) B) and D)
F) B) and C)

Question 17

Monopolistic competition is characterized by firms:

Accepted Answer

A)   producing differentiated products.
B)   making economic profits in the long run.
C)   producing at optimal productive efficiency.
D)   producing where price equals marginal cost.E) C) and D)
F) B) and C)

Question 18

How would many economists view inefficiency in oligopoly?

Accepted Answer

A)   P > MC and P = minimum ATC
B)   P = MC and P > minimum ATC
C)   P = MC and P = minimum ATC
D)   P > MC and P > minimum ATCE) B) and D)
F) B) and C)

Question 19

OPEC provides an example of:

Accepted Answer

A)   an unwritten,informal understanding.
B)   noncollusive oligopoly.
C)   an international cartel.
D)   a monopolistically competitive industry.E) C) and D)
F) A) and D)

Exam 9: Monopolistic Competition and Oligopoly

Refer to the above graph.A successful advertising campaign by a monopolistically competitive firm will cause the demand curve for that firm to shift from:

Correct Answer
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Correct Answer
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Which would be a qualification to the view that oligopoly is allocatively and productively inefficient?

Correct Answer
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Refer to the above graph.This monopolistically competitive firm is:

Correct Answer
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Which would make it easier to maintain an effective collusive agreement in a cartel?

Correct Answer
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A monopolistically competitive firm in the short run is producing where price is $3.00 and marginal cost is $1.50.To maximize profits:

Correct Answer
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Which industry would be the best example of an oligopoly?

Correct Answer
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A positive effect of advertising for society is that it:

Correct Answer
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Monopolistic competitors have some control over the price of their products.

Correct Answer
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OPEC provides an example of:

Correct Answer
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How would many economists view inefficiency in oligopoly?

Correct Answer
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Which would be characteristic of monopolistic competition?

Correct Answer
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On the above graph,if the oligopolist's MC curve shifts from MC₁ to MC₂,the firm will charge:

Correct Answer
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The marginal cost curve intersects the average total cost curve in monopolistic competition:

Correct Answer
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The strategy of establishing a price that prevents the entry of new firms is called:

Correct Answer
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Which constitutes an obstacle to collusion among oligopolists?

Correct Answer
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Monopolistic competition is characterized by firms:

Correct Answer
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In long-run equilibrium,a monopolistically competitive firm achieves optimal productive efficiency but not optimal allocative efficiency.

Correct Answer
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Refer to the above graph of the representative firm in monopolistic competition.Marginal revenue and marginal cost intersect at point:

Correct Answer
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Exam 9: Monopolistic Competition and Oligopoly

Refer to the above graph.A successful advertising campaign by a monopolistically competitive firm will cause the demand curve for that firm to shift from:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which would be a qualification to the view that oligopoly is allocatively and productively inefficient?

Correct AnswerverifiedShow Answer

Refer to the above graph.This monopolistically competitive firm is:

Correct AnswerverifiedShow Answer

Which would make it easier to maintain an effective collusive agreement in a cartel?

Correct AnswerverifiedShow Answer

A monopolistically competitive firm in the short run is producing where price is $3.00 and marginal cost is $1.50.To maximize profits:

Correct AnswerverifiedShow Answer

Which industry would be the best example of an oligopoly?

Correct AnswerverifiedShow Answer

A positive effect of advertising for society is that it:

Correct AnswerverifiedShow Answer

Monopolistic competitors have some control over the price of their products.

Correct AnswerverifiedShow Answer

OPEC provides an example of:

Correct AnswerverifiedShow Answer

How would many economists view inefficiency in oligopoly?

Correct AnswerverifiedShow Answer

Which would be characteristic of monopolistic competition?

Correct AnswerverifiedShow Answer

On the above graph,if the oligopolist's MC curve shifts from MC1 to MC2,the firm will charge:

Correct AnswerverifiedShow Answer

The marginal cost curve intersects the average total cost curve in monopolistic competition:

Correct AnswerverifiedShow Answer

The strategy of establishing a price that prevents the entry of new firms is called:

Correct AnswerverifiedShow Answer

Which constitutes an obstacle to collusion among oligopolists?

Correct AnswerverifiedShow Answer

Monopolistic competition is characterized by firms:

Correct AnswerverifiedShow Answer

In long-run equilibrium,a monopolistically competitive firm achieves optimal productive efficiency but not optimal allocative efficiency.

Correct AnswerverifiedShow Answer

Refer to the above graph of the representative firm in monopolistic competition.Marginal revenue and marginal cost intersect at point:

Correct AnswerverifiedShow Answer

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On the above graph,if the oligopolist's MC curve shifts from MC₁ to MC₂,the firm will charge:

Correct Answer
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