Micro Chapter 12 Quiz

The table below shows the payoff (profit) matrix of Firm A and Firm B indicating the profit outcome that corresponds to each firm's pricing strategy (where $500 and $200 are the pricing strategies of two firms). Refer to Table 12.2. If firm B follows its dominant strategy but firm A does not, then firm B earns a profit of:

$45

The figure given below shows revenue and cost curves of a monopolistically competitive firm. Consider the monopolistically competitive firm described in the Figure 12.1. The profit-maximizing output level and price are _____ and _____ respectively.

H;D

In which market structure model(s) is product differentiation a significant feature?

Monopolistic competition

Which of the following is not an example of nonprice competition?

Nissan lowers the interest rate charged for new automobile financing.

The market structure called monopolistic competition is named using both monopoly and perfect competition. Why?

There are many firms with easy entry and exit but each firm sells a unique product.

An oligopoly market consists of:

a group of firms that dominate the market.

The table below shows the payoff (profit) matrix of Firm A and Firm B indicating the profit outcome that corresponds to each firm's pricing strategy (where $500 and $200 are the pricing strategies of two firms). Refer to Table 12.2. If both firm A and firm B choose their dominant strategies then:

firm A makes a profit of $50 and firm B makes a profit of $40.

In a certain monopolistically competitive market that is characterized by high prices and equally high-quality merchandise, if a firm's competitors begin to successfully introduce new products that cut into the firm's market share, the firm's best counter-strategy is to:

introduce few new products in order to meet competitors head on.

The most-favored customer is one who:

is guaranteed to receive the lowest price for a product.

Firms in monopolistically competitive markets spend significant sums on product differentiation because:

it enables them to earn positive profits in the short run.

A monopolistically competitive market is characterized by:

many firms selling similar but differentiated products.

When the existing firms in a monopolistically competitive industry earn above-normal profit:

new firms enter into the market, and entry continues until firms earn normal profit.

In contrast to perfect competition, in a monopolistically competitive industry:

new firms entering the market produce a close substitute, not an identical or standardized product.

Because of their brand names, Kodak, IBM, Honda, Daimler-Chrysler, and other well-known firms are able to charge significantly higher prices for their products than their competitors without losing any business. Expenditures made by firms to create brand names:

provide reliability to consumers.

One major similarity between perfect competition and monopolistic competition is that:

the firms just break even in the long run.

Wal-Mart created a competitive advantage with its inventory system to reduce the ratio of cost of goods sold to sales, expecting:

to enjoy economic profits for a few years before its rivals caught up.

Which of the following is an example of a cartel?

Organization of the Petroleum Exporting Countries

Which of the following is true of product differentiation?

Product differentiation exists when consumers perceive the products to be different.

A monopolistically competitive firm may earn above normal profits or may incur losses in the short run.

True.

Both monopolistically and perfectly competitive firms earn only normal profits in the long run.

True.