Question 1

Which would make an individual firm's demand curve less elastic?

Accepted Answer

A)   The purchase of more efficient machinery
B)   A reduction in the price of the firm's product
C)   Increased brand loyalty toward the firm's product
D)   A reduction in advertising expenditures by the firmE) C) and D)
F) A) and C)

Question 2

Prices in oligopolistic industries are predicted to fluctuate widely and frequently compared to other market structures.

Accepted Answer

A) True 
 B)False

Question 3

Monopolistically competitive firms have a:

Accepted Answer

A)   horizontal demand curve.
B)   perfectly inelastic demand curve.
C)   perfectly elastic demand curve.
D)   downward-sloping demand curve.E) None of the above
F) All of the above

Question 4

The kinked demand model of noncollusive oligopoly assumes that:

Accepted Answer

A)   rivals will ignore price increases and match price cuts.
B)   each firm is a least-cost producer of the product.
C)   marginal revenue is greater than marginal cost at the kink.
D)   demand is elastic throughout the range of production.E) B) and D)
F) B) and C) A

Question 5

Refer to the above graph of the representative firm in monopolistic competition.Point c is the intersection of the:

Accepted Answer

A)   marginal cost and marginal revenue curves.
B)   marginal cost and average total cost curves.
C)   marginal cost and demand curves.
D)   average total cost and demand curves.E) A) and C)
F) A) and B)

Question 6

Which factor has most contributed to the increased concentration in the U.S.beer industry?

Accepted Answer

A)   Increased demand for strong beers
B)   New technology for filling beer kegs
C)   Economies of scale in production
D)   Increased demand for soft drinksE) A) and C)
F) B) and C)

Question 7

Which statement concerning monopolistic competition is false?

Accepted Answer

A)   In the long run P = AC > MC.
B)   Firms may experience losses in the short run.
C)   Firms differentiate their products,but the products are relatively substitutable.
D)   Firms may experience positive economic profits in the long run since barriers to entry are significant.E) A) and B)
F) B) and D)

Question 8

The kinked-demand curve model of oligopoly:

Accepted Answer

A)   suggests a firm's rivals will ignore a price cut but match a price increase.
B)   suggests small changes in unit costs will have no effect on equilibrium price and output.
C)   assumes a firm's rivals will match any price change it may initiate.
D)   assumes a firm's rivals will ignore any price change it may initiate.E) A) and D)
F) B) and C)

Question 9

A cartel of 10 firms that controls 100 percent of the output in a market and faces the same cost schedules that a monopolist would in the market will have to set a price somewhat lower than the monopoly price for its product.

Accepted Answer

A) True 
 B)False

Question 10

In monopolistic competition there is an underallocation of resources at the profit-maximizing level of output,which means that:

Accepted Answer

A)   minimum ATC is less than MC.
B)   minimum ATC is less than MR.
C)   price is greater than minimum ATC.
D)   price is greater than MC.E) A) and B)
F) B) and C) D

Question 11

In a duopoly,if one firm increases its price,then the other firm can:

Accepted Answer

A)   keep its price constant and thus increase its market share.
B)   keep its price constant and thus decrease its market share.
C)   increase its price and thus increase its market share.
D)   decrease its price and thus decrease its market share.E) B) and D)
F) B) and C)

Question 12

A firm in a cartel typically cheats on its collusive agreement by raising its price and restricting output more than it agreed to with other cartel members.

Accepted Answer

A) True 
 B)False

Question 13

One difference between monopolistic competition and pure competition is that:

Accepted Answer

A)   products can be standardized or differentiated in pure competition.
B)   there is some control over price in monopolistic competition.
C)   monopolistic competition has significant barriers to entry.
D)   firms differentiate their products in pure competition.E) None of the above
F) A) and B)

Question 14

Which industry would be considered to be monopolistically competitive?

Accepted Answer

A)   Asphalt paving
B)   Breakfast cereals
C)   Vacuum cleaners
D)   Small-arms ammunitionE) None of the above
F) A) and B)

Question 15

Pure competition results in a lower price but identical output level compared to those in monopolistic competition.

Accepted Answer

A) True 
 B)False

Question 16

If a monopolistically competitive industry is in long-run equilibrium,a firm in that industry might be able to increase its economic profits by:

Accepted Answer

A)   decreasing the price of its product.
B)   increasing the price of its product.
C)   increasing the demand for its product.
D)   decreasing the demand for its product.E) All of the above
F) None of the above

Question 17

When firms in an industry reach an agreement to fix prices,divide up market share,or otherwise restrict competition,they are using the strategy of:

Accepted Answer

A)   interindustry competition.
B)   limit pricing.
C)   price leadership.
D)   collusion.E) B) and C)
F) None of the above

Question 18

In the kinked-demand model of a noncollusive oligopoly,if one firm decreases its price,the most likely reaction of the other firms will be to:

Accepted Answer

A)   decrease their prices.
B)   increase their prices.
C)   not change their prices.
D)   fix prices.E) All of the above
F) C) and D)

Question 19

The positive view of advertising suggests that it contributes to economic efficiency in the economy.

Accepted Answer

A) True 
 B)False  True

Question 20

In monopolistic competition,we usually observe:

Accepted Answer

A)   significant diseconomies of scale.
B)   more reliance on misleading advertising than in monopoly or oligopoly.
C)   slower rates of technological advance and product development due to higher advertising costs.
D)   a large number of firms,each operating with excess capacity.E) A) and C)
F) A) and B)

Exam 9: Monopolistic Competition and Oligopoly

Which would make an individual firm's demand curve less elastic?

Correct AnswerverifiedShow Answer

Prices in oligopolistic industries are predicted to fluctuate widely and frequently compared to other market structures.

Correct AnswerverifiedShow Answer

Monopolistically competitive firms have a:

Correct AnswerverifiedShow Answer

The kinked demand model of noncollusive oligopoly assumes that:

Correct AnswerverifiedA

Refer to the above graph of the representative firm in monopolistic competition.Point c is the intersection of the:

Correct AnswerverifiedShow Answer

Which factor has most contributed to the increased concentration in the U.S.beer industry?

Correct AnswerverifiedShow Answer

Which statement concerning monopolistic competition is false?

Correct AnswerverifiedShow Answer

The kinked-demand curve model of oligopoly:

Correct AnswerverifiedShow Answer

A cartel of 10 firms that controls 100 percent of the output in a market and faces the same cost schedules that a monopolist would in the market will have to set a price somewhat lower than the monopoly price for its product.

Correct AnswerverifiedShow Answer

In monopolistic competition there is an underallocation of resources at the profit-maximizing level of output,which means that:

Correct AnswerverifiedD

In a duopoly,if one firm increases its price,then the other firm can:

Correct AnswerverifiedShow Answer

A firm in a cartel typically cheats on its collusive agreement by raising its price and restricting output more than it agreed to with other cartel members.

Correct AnswerverifiedShow Answer

One difference between monopolistic competition and pure competition is that:

Correct AnswerverifiedShow Answer

Which industry would be considered to be monopolistically competitive?

Correct AnswerverifiedShow Answer

Pure competition results in a lower price but identical output level compared to those in monopolistic competition.

Correct AnswerverifiedShow Answer

If a monopolistically competitive industry is in long-run equilibrium,a firm in that industry might be able to increase its economic profits by:

Correct AnswerverifiedShow Answer

When firms in an industry reach an agreement to fix prices,divide up market share,or otherwise restrict competition,they are using the strategy of:

Correct AnswerverifiedShow Answer

In the kinked-demand model of a noncollusive oligopoly,if one firm decreases its price,the most likely reaction of the other firms will be to:

Correct AnswerverifiedShow Answer

The positive view of advertising suggests that it contributes to economic efficiency in the economy.

Correct AnswerverifiedTrue

In monopolistic competition,we usually observe:

Correct AnswerverifiedShow Answer

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A

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D

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True

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