Economics (McConnell) AP Edition, 19th Edition

Chapter 11: Monopolistic Competition and Oligopoly (+ Appendix)

Quiz

1
Compared to a competitive firm, a monopolistically competitive firm:
A)faces a less elastic 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
2
An industry whose Herfindahl index is 5300, producing a standardized product, is most likely an example of:
A)pure competition
B)monopolistic competition
C)oligopoly
D)pure monopoly
3
Use the following payoff matrix to answer the next question.

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Refer to the matrix, which shows the profit payoffs to each of two oligopolistic firms of following either a high- or low-price policy. Gamma's payoffs are in the lower left corner of each cell; Delta's in the upper right. If Gamma uses a high-price strategy and Delta uses a low-price strategy:
A)their profits will be the same
B)Gamma's profits will exceed Delta's profits
C)Delta would prefer to switch to a high-price strategy
D)Gamma would prefer to switch to a low-price strategy
4
Suppose several firms in a purely competitive industry begin to experiment slightly with their product designs. This product differentiation allows them to modestly increase their prices and increase their short-run profits. The industry now more closely resembles:
A)pure monopoly
B)oligopoly
C)monopolistic competition
D)competitive monopoly
5
Suppose only three airlines service a particular route. One of the airlines typically signals its price intentions through a daily posting on its internet site, which the other two quickly match. This best describes:
A)cost-plus pricing
B)price leadership
C)a cartel
D)game theory
6
If an oligopolist's demand curve is kinked at the going price:
A)The loss in revenue from reducing output by one unit exceeds the gain in revenue from expanding output by one unit
B)The gain in revenue from expanding output by one unit exceeds the loss in revenue from reducing output by one unit
C)total revenue will remain constant if price is changed in either direction
D)profits will rise if price is increased but fall if price is decreased
7
Use the following diagram to answer the next question.

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The monopolistically competitive firm illustrated in the diagram exhibits productive inefficiency because its profit maximizing:
A)output is not at the intersection of demand and marginal cost
B)output is not at the intersection of marginal cost and average total cost
C)price exceeds marginal revenue
D)price exceeds marginal cost
8
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
9
A particular industry consists of three firms whose market shares are 50%, 30%, and 20%. The Herfindahl index for the industry is:
A)33.3
B)100
C)2400
D)3800
10
Use the following payoff matrix to answer the next question.

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Refer to the matrix, which shows the profit payoffs to each of two oligopolistic firms of following either a high- or low-price policy. Gamma's payoffs are in the lower left corner of each cell; Delta's in the upper right. If both firms make their decisions independently, the most likely outcome is:
A)$50 for both Gamma and Delta
B)$30 for both Gamma and Delta
C)$75 for Gamma and $20 for Delta
D)$20 for Gamma and $75 for Delta
McConnell Economics Nineteenth Edition Large Cover Image
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