Question 1

An example of a monopolistically competitive industry would be:

Accepted Answer

A)   steel.
B)   soybeans.
C)   electricity.
D)   retail clothing.

Question 2

The characteristic most closely associated with oligopoly is:

Accepted Answer

A)   easy entry into the industry.
B)   a few large producers.
C)   product standardization.
D)   no control over price.

Question 3

Monopolistically competitive firms exist due to high barriers to entry.

Accepted Answer

A) True 
 B)False

Question 4

One prediction about monopolistic competition is that firms:

Accepted Answer

A)   operate at minimum average total cost in the long run.
B)   will not engage in brand advertising.
C)   will be inefficient in the long run.
D)   must make economic profits in the short run.

Question 5

In an oligopolistic market there is likely to be:

Accepted Answer

A)   little consideration of the actions of rival firms.
B)   price-taking behavior on the part of firms.
C)   homogeneous but not differentiated products.
D)   neither allocative nor productive efficiency.

Question 6

Which cannot be a characteristic of an oligopolistic industry?

Accepted Answer

A)   Differentiated products
B)   A large number of consumers
C)   Significant barriers to entry
D)   A perfectly elastic firm demand curve

Question 7

The goal of product differentiation and advertising in monopolistic competition is to make:

Accepted Answer

A)   the firm allocatively efficient even if it is not productively efficient.
B)   the firm productively efficient even if it is not allocatively efficient.
C)   price less of a factor and product differences more of a factor in consumer purchases.
D)   price more of a factor and product differences less of a factor in consumer purchases.

Question 8

Brand names and packaging are forms of product differentiation under monopolistic competition.

Accepted Answer

A) True 
 B)False

Question 9

Which statement concerning the kinked demand curve model of oligopoly is false?

Accepted Answer

A)   It addresses the question of price stickiness.
B)   It assumes when one oligopolist raises the price,all others follow.
C)   The portion of the demand curve above the kink is more elastic than the portion below.
D)   The firm's marginal costs can sometimes shift without changing the profit-maximizing price and output.

Question 10

Firms in an industry cannot earn long-run economic profits if:

Accepted Answer

A)   fixed costs are zero.
B)   the number of firms in the industry is fixed.
C)   there is free entry and exit of firms in the industry.
D)   production costs for a given level of output are minimized.

Question 11

Refer to the above graph of a representative firm in monopolistic competition.What does line 1 represent?

Accepted Answer

A)   Demand
B)   Marginal cost
C)   Marginal revenue
D)   Average total cost

Question 12

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.If both firms operate independently and do not collude,the most likely profit is:

Accepted Answer

A)   $400,000 for firm X and $400,000 for firm Y.
B)   $725,000 for firm X and $475,000 for firm Y.
C)   $475,000 for firm X and $725,000 for firm Y.
D)   $625,000 for firm X and $625,000 for firm Y.

Question 13

A prediction from the kinked-demand curve model of noncollusive oligopoly is that,for an individual firm,small changes in:

Accepted Answer

A)   demand will not lead to changes in price or output.
B)   marginal revenue will lead to changes in price and output.
C)   marginal cost will lead to changes in price and output.
D)   marginal cost will not lead to changes in price or output.

Question 14

The incentive to cheat is strong in a cartel because:

Accepted Answer

A)   each firm can increase its output and thus its profits by cutting price.
B)   the marginal revenue for an individual firm is greater than marginal cost at the profit-maximizing price set by the cartel.
C)   there is a significant lack of government regulation of cartels,especially those in worldwide production.
D)   the costs of production are the same for each firm,but the product demand differs.

Question 15

Refer to the above graph of a representative firm in monopolistic competition.What does line 4 represent?

Accepted Answer

A)   Demand
B)   Marginal cost
C)   Marginal revenue
D)   Average total cost

Question 16

The primary copper industry in the United States would be an example of a:

Accepted Answer

A)   duopoly.
B)   noncollusive oligopoly.
C)   homogeneous oligopoly.
D)   differentiated oligopoly.

Question 17

The larger the number of firms in an industry and the less the extent of product differentiation,the greater will be the elasticity of the individual seller's demand curve.

Accepted Answer

A) True 
 B)False

Question 18

When the excess capacity problem under monopolistic competition becomes greater,there will be:

Accepted Answer

A)   a narrower range of consumer choice.
B)   fewer advertisements and promotions.
C)   a wider range of consumer choice.
D)   more entry by firms into the market.

Question 19

A major distinction between a monopolistically competitive firm and an oligopolistic firm is that:

Accepted Answer

A)   one is a price taker and the other is a price maker.
B)   a recognized interdependence exists between firms in one industry but not in the other.
C)   one always produces differentiated products and the other always produces a homogeneous product.
D)   one necessarily faces a downward-sloping demand curve and the other a horizontal demand curve.

Question 20

Which is not a form of product differentiation for the monopolistically competitive firm?

Accepted Answer

A)   Brand names and trademarks
B)   Promotion and packaging
C)   Location and accessibility
D)   Standard weekday and weekend hours

Exam 9: Monopolistic Competition and Oligopoly

Refer to the above graph of a representative firm in monopolistic competition.What does line 1 represent?

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When the excess capacity problem under monopolistic competition becomes greater,there will be:

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Monopolistically competitive firms exist due to high barriers to entry.

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One prediction about monopolistic competition is that firms:

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The characteristic most closely associated with oligopoly is:

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The larger the number of firms in an industry and the less the extent of product differentiation,the greater will be the elasticity of the individual seller's demand curve.

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A major distinction between a monopolistically competitive firm and an oligopolistic firm is that:

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Firms in an industry cannot earn long-run economic profits if:

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The incentive to cheat is strong in a cartel because:

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Which is not a form of product differentiation for the monopolistically competitive firm?

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Refer to the above graph of a representative firm in monopolistic competition.What does line 4 represent?

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The goal of product differentiation and advertising in monopolistic competition is to make:

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An example of a monopolistically competitive industry would be:

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In an oligopolistic market there is likely to be:

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Brand names and packaging are forms of product differentiation under monopolistic competition.

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Which cannot be a characteristic of an oligopolistic industry?

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A prediction from the kinked-demand curve model of noncollusive oligopoly is that,for an individual firm,small changes in:

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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.If both firms operate independently and do not collude,the most likely profit is:

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Which statement concerning the kinked demand curve model of oligopoly is false?

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The primary copper industry in the United States would be an example of a:

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