Chapter 10 Eco

One way to view the cost structure of monopolistic competition is to say that the cost of product differentiation is equal to a. the difference between the cost of production for a monopolistically competitive firm in an open market and the minimum average total cost. b. the sum of marginal cost and minimum average cost. c. the difference between marginal revenue and marginal cost. d. the sum of price and marginal cost.

a. the difference between the cost of production for a monopolistically competitive firm in an open market and the minimum average total cost.

A good that people must actually consume before they can determine qualities is called a. an experience good. b. a search good. c. a persuasive good. d. a credence good.

a. an experience good.

A group of firms that try to work together to earn monopoly profits is called a(n) a. cartel. b. public enterprise. c. patent. d. natural monopoly.

a. cartel.

The measurement of industry concentration which calculates the percentage of all sales contributed by a specific number of leading firms is called the a. concentration ratio. b. Herfindahl-Hirschman Index. c. producer price index. d. P/E ratio.

a. concentration ratio.

The most common reason for the existence of oligopolies is a. economies of scale. b. advertising. c. diseconomies of scale. d. ease of entry.

a. economies of scale.

Which of the following has the highest Herfindahl-Hirschman index? a. monopoly b. monopolistic competition c. oligopoly d. Any of these, depending on the size of firm sales

a. monopoly

In oligopoly, any action by one firm to change price, output, or quality causes a. loss of market share by the acting firm. b. a reaction by other firms. c. no reaction from the other firms. d. a profit gain for the other firms.

b. a reaction by other firms.

In the long run in a monopolistically competitive market, a firm will, in theory, a. earn economic profits. b. break even. c. suffer losses. d. earn zero accounting profits.

b. break even.

A merger between firms that are in the same industry is called a a. conglomerate merger. b. horizontal merger. c. vertical merger. d. None of these.

b. horizontal merger.

The dominant strategy allows a firm to a. escape from a Prisoners' Dilemma situation. b. obtain the highest benefit, regardless of its rivals' actions. c. transform a zero-sum game into a positive-sum game. d. transform a negative-sum game into a positive-sum game.

b. obtain the highest benefit, regardless of its rivals' actions.

Strategic behavior and game theory are features of which market structure? a. perfect competition b. oligopoly c. monopoly d. monopolistic competition

b. oligopoly

In both a monopolistically competitive market and a pure monopoly market, firms a. are protected by entry barriers. b. set price greater than marginal cost. c. advertise extensively. d. can make long-run profits.

b. set price greater than marginal cost.

The long-run equilibrium of a monopolistically competitive firm is characterized by a. production at the minimum point of the firm's average variable cost curve. b. production at the minimum point of the firm's average total cost curve. c. a tangency of the average total cost curve with the firm's demand curve. d. price equal to marginal cost.

c. a tangency of the average total cost curve with the firm's demand curve.

In game theory, the strategy that always yields the highest benefit for the player using it is the a. cooperative strategy. b. prisoners' strategy. c. dominant strategy. d. matrix strategy.

c. dominant strategy.

The distinguishing of products by brand name, color, and other attributes a. leads to many firms in the market. b. leads to collusion. c. is known as product differentiation. d. is known as interdependence.

c. is known as product differentiation.

In a two-sided market, a firm that provides services that link together groups of consumers and producers is called a(n) a. tit-tat. b. end user. c. platform. d. monopoly.

c. platform.

An oligopoly is a market situation in which a. there are many firms producing differentiated products. b. all the sellers act independently of the others. c. there are very few sellers and they recognize their strategic dependence on one another. d. there is a single firm producing several varieties of a product.

c. there are very few sellers and they recognize their strategic dependence on one another.

All of the following are characteristics of monopolistic competition EXCEPT a. many firms in the industry. b. advertising. c. product differentiation. d. a few firms dominate the industry.

d. a few firms dominate the industry.

Compared with a perfectly competitive firm facing the same costs, long-run equilibrium for a monopolistically competitive firm will result in a. a lower price and less output. b. a lower price and greater output. c. a higher price and greater output. d. a higher price and less output.

d. a higher price and less output.

The demand curve faced by a monopolistically competitive firm is a. horizontal. b. upward sloping. c. vertical. d. downward sloping.

d. downward sloping.

The industry concentration ratio measures the a. difference between price and marginal cost for the largest firms in the industry. b. degree of product differentiation in the market. c. value of the assets owned by the largest corporations in the market. d. percentage of industry sales accounted for by the top four or eight firms.

d. percentage of industry sales accounted for by the top four or eight firms.

In a monopolistically competitive market, a firm should advertise to the point at which a. it can raise price to the highest level possible. b. it is selling the most units it can possibly sell. c. the extra revenue from an additional dollar spent on advertising just equals the marginal cost of producing one more unit of the good. d. the additional revenue generated by one more dollar of advertising just equals the extra dollar cost of advertising.

d. the additional revenue generated by one more dollar of advertising just equals the extra dollar cost of advertising.