Econ 211
Demand and marginal revenue curves are downward-sloping for monopolistically competition firms because... a)product differentiation allows each firm some degree of monopoly power b)there are a few large firms in the industry and they each act as a monopolist c)mutual interdependence among all firms in the industry leads to collusion d)each firm has to take the market price as given
A
Other things being equal, a firm in a cartel will most likely cheat on a price-fixing agreement by... a)secretly lowering price and increasing sales to a few customers b)organizing promotions of the product c)secretly increasing sales to a large number of small customers d)increasing price and restricting its output
A
Product variety is likely to be greater in... a)monopolistic competition than in pure competition b)pure competition than in monopolistic competition c)homogenous oligopoly than in monopolistic competition d)homogeneous oligopoly than in differentiated oligopoly
A
Which of the following is not a characteristic of long-run equilibrium under monopolistic competition? a)price equals minimum average total cost b)price is equal to average total cost c)price exceeds marginal cost d)marginal cost equals marginal revenue
A
Which set of characteristics below best describes the basic features of monopolistic competition? a)easy entry, many firms, and differentiated products b)easy entry, many firms, and standardized products c)barriers to entry, few firms, and differentiated products d)easy entry, few firms, and standardized products
A
Demand and marginal revenue curves are downward-sloping for monopolistically competitive firms because... a)each firm has to take the market price as given b)product differentiation allows each firm some degree of monopoly power c)there are a few large firms in the industry and they each act as a monopolistic d)mutual interdependence among all firms in the industry leads to collusion
B
In the long run, a monopolistically competitive firm... a)earns an economic profit b)produces where P=ATC c)produces where MR exceeds MC d)achieves allocative efficiency
B
In which market model is there mutual interdependence? a)monopolistic competition b)oligopoly c)pure monopoly d)pure competition
B
Obstacles to collusion among oligopolists include the following except... a)potential new entrants into the market b)"gentlemen's agreements" among the firms c)demand and costs differences among firms d)long-lastings economic recession and poor industry performance
B
One difference between monopolistic competition and pure competition is that... a) products may be homogenous in monopolistic 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
B
Product differentiation in monopolistic competition involves a trade-off between... a)short-run profits and long-run efficiency b)consumer choice and productive efficiency c)productive efficiency and allocative efficiency d)monopoly power and ease of entry
B
The demand curve faced by a monopolistically competitive firm... a)is more elastic than the demand curve faced by the purely competitive firm b)is more elastic than the monopolist's demand curve c)is less elastic than the monopolist's demand curve d)will shift outward as new firms enter the industry
B
The restaurant, legal assistance, and clothing industries are each illustrations of... a)pure monopoly b)monopolistic competition c)homogeneous oligopoly d)countervailing power
B
Under monopolistic competition, entry to the industry is... a)completely free of barriers b)more difficult than under pure competition but not nearly as difficult as under pure monopoly c)more difficult than under pure monopoly d)blocked
B
A monopolistically competitive industry is like a purely competitive industry in that... a)each firm produces a standardized product b)nonprice competition is a feature in both industries c)neither industry has significant barriers to entry d)firms in both industries face a horizontal demand curve
C
A significant difference between a monopolistically competitive firm and a purely competitive firm is that the... a)former has fewer barriers to entry into the industry b)latter recognizes that price must be reduced to sell more output c)latter's demand curve is perfectly elastic d)latter differentiates its product
C
In the short run, a profit-maximizing monopolistically competitive firm sets it price... a)equal to marginal revenue b)equal to marginal cost c)above marginal cost d)below marginal cost
C
The monopolistically competitive seller's demand curve will become more elastic the... a)more significant the barriers to entering the industry b)greater the degree of product differentiation c)larger the number of competitors d)smaller the number of competitors
C
Which industry would be best characterized as monopolistically competitive? a)smartphone manufacturing b)internet-search sites c)web design consulting d)business cloud-computing services
C
A firm in an oligopoly is similar to a monopoly in that... a)both firms do not face competition from others b)both firms do not need to advertise c)both firms face very inelastic demand for their products d)both firms could have significant market power and control over price
D
Game theory can be used to demonstrate that oligopolists... a)rarely consider the potential reactions of rivals b)experience economies of scale c)may be either homogenous or differentiated d)can increase their profits through collusion
D
In the long run equilibrium, a profit-maximizing firm in a monopolistically competitive industry will produce the quantity of output where... a)ATC=P, MR=MC=P b)ATC<P, MR=MC=P c)ATC<P, MR+MC<P d)ATC=P, MR=MC<P
D
The effects of advertising on a firm's profits and efficiency... a)are only observed in oligopoly b)are definitely positive c)are definitely negative d)may be positive or negative
D
The study of how people (or firms) behave in strategic situations is called... a)normative economics b)cost-benefit analysis c)recursive analysis d)game theory
D
When firms in an industry reach an agreement to fix prices, divide up market share, or otherwise restrict competition they are practicing the strategy of... a)limit pricing b)interindustry competition c)price leadership d)collusion
D
Which of the following is a characteristic of monopolistic competition? a)standardized product b)a relatively small number of firms c)absence of nonprice competition d)relatively easy entry
D
True or False Monopolistically competitive sellers produce efficiently because they obtain only normal profits in the long run
False
True or False The entry of more firms into a monopolistically competitive market tends to increase the excess capacity of firms in the industry in the long run
False
True or False "Excess capacity" exists in monopolistic competition but not in pure competition
True
