Econ #8 homework (exam 2)

3A firm is operating in the United States with only two other competitors in the industry. 1. It is likely this industry would be characterized as multiple choice 1 a. perfectly competitive. b. pure monopoly. c. oligopoly. d. monopolistically competitive. 2. Firms in this industry will likely earn multiple choice 2 a. an economic loss. b. a normal profit. c an economic profit. c. If foreign firms begin supplying the product, increasing the number of competitors, it is likely that multiple choice 3 a. normal profits will increase. b. economic profits will increase. c economic losses will become smaller. d. economic profits will fall.

1. c 2. c 3.d

Monopolistic competition is characterized by firms Multiple Choice a. producing differentiated products. b. making economic profits in the long run. c .producing at optimal productive efficiency. d. producing where price equals marginal cost.

a.

What is one difference between a firm in a perfectly competitive industry and a firm in a monopolistically competitive industry? multiple choice a. A monopolistically competitive firm does not have the exact same product as other firms. b. A monopolistically competitive firm does not choose a level of output where marginal cost is equal to marginal revenue. c .A monopolistically competitive industry does not have a large number of sellers. d .A monopolistically competitive firm does not face entry from other firms.

a.

Which of the following best represents the pricing behavior of firms in a monopolistically competitive industry? multiple choice a. Teen Angle Hardware looks for a niche to sell its hardware products to teens but finds it difficult to earn anything more than normal profits due to other hardware stores also looking for niches. b. Stay*Put Clothespins takes the market price of clothespins as given and produces the amount of clothespins where marginal revenue equals marginal cost. c. Looking Over Your Shoulder Handbag Co. chooses the price it charges by estimating what its rivals are most likely to do and then taking their responses into consideration. d/ Unykdrugs Inc. knows it will not face competition due to patents it holds on its products, the company's pricing strategy is based on the market demand for the product.

a.

Assume that in a monopolistically competitive industry, firms are earning economic profit. This situation will Multiple Choice a. reduce the excess capacity in the industry as firms expand production. b. attract other firms to enter the industry, causing the existing firms' profits to shrink. c. cause firms to standardize their product to limit the degree of competition. d. make the industry allocatively efficient as each firm seeks to maintain its profits.

b.

Mutual interdependence means that each firm in an oligopoly Multiple Choice a. faces a perfectly inelastic demand for its product. b. considers the reactions of its rivals when it determines its pricing policy. c. depends on the other firms for its inputs. d. depends on the other firms for its markets.

b.

One difference between monopolistic competition and pure competition is that Multiple Choice a. products may be homogeneous 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.

Suppose some firms exit an industry characterized by monopolistic competition. We would expect the demand curve of a firm already in the industry to Multiple Choice a. shift to the left. b. shift to the right. c. . become less elastic. d. remain the same since entering firms serve other customers in the market.

b.

Under monopolistic competition, entry to the industry is Multiple Choice 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.

Which of the following characteristics differentiates a firm in an oligopolistic market from a firm in a perfectly competitive market? multiple choice a. A firm in an oligopolistic market does not face competition from other firms. b A firm in an oligopolistic market has to consider its own impact on price when making production decisions. c. Firms in oligopoly markets do not reach a profit maximum when marginal revenue equals marginal cost. d.A firm in an oligopolistic market does not maximize profits.

b.

Which of the following is an example of an oligopolistic market with a differentiated product? multiple choice a. the market for chicken breasts b the market for cell phone services c. the market for electricity d. the market for copper

b.

A successful advertising campaign by the firm will cause its demand curve to shift from Multiple Choice a. A to B and become more elastic. b. A to B and become less elastic. c. B to A and become more elastic. d. B to A and become less elastic.

b. (rightward shift, becoming more inelastic)

Oligopolies are considered to be multiple choice a. both allocatively efficient, but not productively efficient. b. both productively efficient, but not allocatively efficient. c. neither allocatively nor productively efficient. d. both allocatively and productively efficient.

c.

Suppose the Herfindahl indexes for industries A, B, and C are 5,100, 1,750, and 2,250, respectively. These data imply that Multiple Choice a. market power is greatest in industry B. b. market power is greatest in industry C. c. market power is greatest in industry A. d. industry A is more competitive than industry B.

c.

The consumer Wi-Fi-service providers' market is best described as a(n) Multiple Choice a. monopolistic competition. b monopoly. c. oligopoly. d, perfectly competitive market.

c.

What is one difference between a firm in a perfectly competitive industry and a firm in a monopolistically competitive industry? multiple choice 2 a. A monopolistically competitive firm does not face a downward-sloping demand curve. b. A monopolistically competitive firm is guaranteed to make more than normal profits in the long run. c. A monopolistically competitive firm faces competition from firms producing close substitutes. d. A monopolistically competitive firm does not choose a level of output where marginal cost is equal to marginal revenue.

c.

Which of the following best represents the pricing behavior of firms in an oligopolistic market? multiple choice a. Stay*Put Clothespins takes the market price of clothespins as given and produces the amount of clothespins where marginal revenue equals marginal cost. b. Teen Angle Hardware looks for a niche to sell its hardware products to teens but finds it difficult to earn anything more than normal profits due to other hardware stores also looking for niches. c. Looking Over Your Shoulder Handbag Co. chooses the price it charges by estimating what its rivals are most likely to do and then taking their responses into consideration. d. Unykdrugs Inc. knows it will not face competition due to patents it holds on its products, the company's pricing strategy is based on the market demand for the product.

c.

A cartel is Multiple Choice a. a coordinating group of competing firms. b. legal in the United States. c. always successful in raising profits. d. a formal agreement among firms to collude.

d.

At long-run equilibrium in monopolistic competition, there is Multiple Choice a. allocative efficiency. b. productive efficiency. c. both allocative and productive efficiency. d. neither allocative nor productive efficiency.

d.

If a cartel is successful Multiple Choice a. the consumers will pay lower prices. b, the consumers will have more goods and services to choose from. c. the firms will lose profits in a perfectly competitive market. d. the firms will act like a monopoly.

d.

In monopolistic competition there is an under-allocation of resources at the profit-maximizing level of output, which means that Multiple Choice a. ATC is not equal to MC. b. price is greater than MR. c. price is greater than minimum ATC. d. price is greater than MC.

d.

In the long run, a representative firm in a monopolistically competitive industry will end up Multiple Choice a. having an elasticity of demand that will be less than it was in the short run. b. having a larger number of competitors than it will in the short run. c. producing a level of output at which marginal cost and price are equal. d. earning a normal profit, so zero economic profit.

d.

Which of the following is an example of an oligopolistic market with a standardized product? multiple choice a. the market for breakfast cereal b the market for automobiles c. the market for jewelry d the market for aluminum

d.