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| 1 | |
A monopolistically competitive market structure is characterized by all the following except: |
| | A) | all firms sell a differentiated product. |
| | B) | all firms are price takers. |
| | C) | there are no barriers to entry of new firms. |
| | D) | there are many, small, independently acting sellers. |
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| 2 | |
Compared to a competitive firm, a monopolistically competitive firm: |
| | A) | faces a more inelastic demand curve. |
| | B) | is less likely to advertise its product. |
| | C) | faces a more elastic demand curve. |
| | D) | can earn positive profits in the long run. |
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| 3 | |
Suppose several firms in a purely competitive industry begin to experiment slightly with their product design, which allows them to modestly increase their prices. The industry would now more closely resemble: |
| | A) | pure monopoly. |
| | B) | oligopoly. |
| | C) | monopolistic competition. |
| | D) | competitive monopoly. |
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| 4 | |
Consider the following information for a typical firm in a particular monopolistically competitive industry. Price = $50, MR = MC = $40, ATC = $45. From the information given, we can conclude that: |
| | A) | this firm's demand curve will shift to the right as some firms exit the industry. |
| | B) | this firm's demand curve will shift to the left as some firms enter the industry. |
| | C) | this firm's demand curve will shift to the right as some firms enter the industry. |
| | D) | the industry is in long-run equilibrium. |
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| 5 | |
In which market structure(s) will price exceed marginal revenue? |
| | A) | Differentiated oligopoly and monopoly only |
| | B) | Standardized oligopoly and pure competition only |
| | C) | Monopolistic competition and monopoly only |
| | D) | Monopolistic competition, oligopoly, and monopoly |
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| 6 | |
Use the following diagram to answer the question. <![CDATA[<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=jpg::::/sites/dl/free/0073511455/991476/ch09_q6.jpg','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (14.0K)</a>]]>
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| | A) | The monopolistically competitive firm illustrated in the diagram exhibits productive inefficiency because its: |
| | B) | output is not at the intersection of demand and marginal cost. |
| | C) | output is not at the intersection of marginal cost and average total cost. |
| | D) | price exceeds marginal revenue. |
| | E) | price exceeds marginal cost. |
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| 7 | |
Use the following payoff matrix to answer the question. <![CDATA[<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=jpg::::/sites/dl/free/0073511455/991476/ch09_q7.jpg','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (25.0K)</a>]]>
Refer to the matrix, which shows the profit payoffs to each of two oligopolistic firms following either a high or low price policy. Gamma's payoffs are in the lower left corner of each cell; Delta's are in the upper right. If both firms collude to maximize joint profits, the combined profits of the two firms will be: |
| | A) | $40. |
| | B) | $60. |
| | C) | $95. |
| | D) | $100. |
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| 8 | |
Use the following diagrams to answer the question. <![CDATA[<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=jpg::::/sites/dl/free/0073511455/991476/ch09_q8.jpg','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (30.0K)</a>]]>
Refer to the diagrams. Zero long-run economic profits are most likely to occur in markets illustrated by: |
| | A) | Figure B only. |
| | B) | Figures B and C. |
| | C) | Figures C and A. |
| | D) | Figures B and D. |
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| 9 | |
In an oligopolistic industry: |
| | A) | firms behave strategically. |
| | B) | output is produced at minimum average total cost. |
| | C) | firms make price and output decisions without regard to the responses of their rivals. |
| | D) | high profits will attract many new entrants to the industry. |
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| 10 | |
Use the following diagram of a monopolistically competitive firm to answer the question. <![CDATA[<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=jpg::::/sites/dl/free/0073511455/991476/ch09_q10.jpg','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (15.0K)</a>]]>
Refer to the diagram. Suppose the demand for this industry's product increases, shifting each firm's demand curve to the right. In the long run, we would expect: |
| | A) | entry of new firms, shifting up the average total cost curve of each firm to restore equilibrium. |
| | B) | entry of new firms, shifting back the demand curve for each firm to restore equilibrium. |
| | C) | exit of some firms, shifting back the demand curve for each firm to restore equilibrium. |
| | D) | exit of some firms, shifting up the average total cost curve of each firm to restore equilibrium. |
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