Unit 4's Chapter 10 Quiz

What role can advertising play with respect to differentiated products?

shapes consumers intangible preferences

Let's pretend one firm operating in an oligopoly raises its price and other firms do not do so. Then we should expect that:

the sales of the firm that increased its price will decline sharply.

If a monopolistic competitor raises its price, it _________ customers than a perfectly competitive firm, but ________________ customers compared to the number that a monopoly that raised its prices would.

will lose fewer; it will lose more

Which of the following would be classified as a differentiated product produced by a monopolistic competitor?

Channel No. 5 perfume

When we analyze situations in which players must make decisions and then receive payoffs, the general term used by economists is:

Game Theory

Shopping malls typically lease retail space to a large number of clothing stores. When this group of retailers competes to sell similar but not identical products, they engage in what economists call:

Monopolistic Competition

When firms act together, such as O.P.E.C. does, to reduce output and keep prices high, we call these firms:

a cartel

When firms act together, such as O.P.E.C. does, to reduce output and keep prices high, we call these firms:

a cartel.

Let's pretend we are in a monopolistically competitive industry where P > MC. Then we should expect that this industry will most likely produce ______________________ than in a perfectly competitive industry.

a lower quantity of a good and charge a higher price

In the framework of an oligopoly, what strategy can work like a silent form of cooperation?

always match other firms' price cuts, but don't match price increases

When a few large firms legally have all or most of the sales in an industry, we call this:

an oligopoly

If oligopolists compete hard against each other,

approaching zero profits will result for all.

The desire of businesses to __________________________, so that they can raise the prices that they charge and earn higher profits, is a reason why oligopolies are ripe for collusion.

avoid competing with each other

Oligopoly firms acting individually may seek to gain profits:

by expanding levels of output and cutting prices.

How can forms who find themselves in a prisoner's dilemma situation avoid the undesired outcome and cooperate with each other?

by finding effective ways to penalize firms who do not cooperate

The desire of businesses to __________________________, so that they can raise the prices that they charge and earn higher profits, is a reason why oligopolies are ripe for collusion.

compete with each other

The best way to explain the concept of differentiated products is:

describing the degree of product variety that is available.

Monopolistic competitors in the food industry will often include a recyclable symbol on packaging used for their product as a means to:

differentiate their product.

Let's pretend we are a monopolistic competitor. Then our demand curve is:

downward-sloping left to right.

Let's pretend we are in a monopolistic competitive industry, Then firms in this industry can try to differentiate their products by all of the following except:

drastically raising the price.

The perceived demand curve for a group of competing oligopoly firms will appear kinked as a result of their commitment to:

match price cuts, but not price increases.

The single most common form of competition in the U.S. is:

monopolistic competition among firms with different products

Even though it seems to be an oxymoron, the name monopolistic competition implies that a firm's decisions in this setting will in certain ways resemble ______________ and in other ways resemble________________ .

monopoly; perfect competition

Let's pretend we are in a monopolistically competitive market. Then the rule for maximizing profit is to set MR = MC, which means

price is higher than marginal revenue.

Let's pretend we are a profit-maximizing monopolistic competitor. Then our first step when wanting to decide what price to charge is to:

select the profit maximizing quantity to produce.

Let's pretend a firm is producing at a quantity of output where marginal revenue exceeds marginal cost. IN order to maximize profit, this firm:

should keep expanding production.

Product differentiation may occur in _______________ because ____________________ created strong preferences for certain brands.

the minds of buyers; past habits and advertising

If a monopoly or a monopolistic competitor raises their prices, the quantity demanded:

will decrease.

If a monopoly or a monopolistic competitor lowers their prices, then

will increase.

Would raising the price for a product create a larger decline in quantity demanded for a monopolistic competitor's than it would for a monopoly?

yes; consumers will buy from competitors offering lower priced substitutes