econ quiz 6

Oligopoly is a market structure that is characterized by a: A) small number of interdependent firms producing identical or differentiated products. B) small number of independent firms producing identical or differentiated products. C) large number of relatively small independent firms producing differentiated products. D) large number of relatively small independent firms producing identical products.

A) small number of interdependent firms producing identical or differentiated products.

(Figure: Short-Run Monopoly) Look at the figure Short-Run Monopoly. The profit-maximizing rule is satisfied by the intersection at point: A) G. B) H. C) J. D) L.

D) L.

An industry characterized by a few interdependent firms and by barriers to entry is called: A) perfect competition. B) monopolistic competition. C) monopoly. D) oligopoly.

D) oligopoly.

An industry that is dominated by a few firms, each of whose firms recognizes that its own choices can affect the choices of its rivals and vice versa, is: A) a monopoly. B) an oligopoly. C) characterized by monopolistic competition. D) characterized by perfect competition.

B) an oligopoly.

Which of the following is true? A) A monopoly firm is a price-maker. B) MR = P if the demand curve is downward sloping. C) MR = MC is a profit-maximizing rule for firms in perfect competition only. D) Monopolies tend to charge lower prices than perfectly competitive firms.

A) A monopoly firm is a price-maker.

To maximize profit, a monopolistically competitive firm should produce the level of output at which: A) marginal revenue equals marginal cost. B) price equals marginal cost. C) price equals total cost. D) marginal revenue equals price.

A) marginal revenue equals marginal cost.

In monopolistic competition: A) there is free entry and exit in the long run. B) each firm produces a standardized product. C) there are few producers. D) there are barriers to entry.

A) there is free entry and exit in the long run.

Compared to a perfectly competitive industry, a monopolist: A) produces a large quantity. B) charges a higher price. C) increases consumer surplus. D) earns less profit in the long run.

B) charges a higher price.

Oligopoly is a market structure characterized by: A) independence in decision making. B) uncertainty about the behavior of rival firms. C) substantial diseconomies of scale. D) a large number of small firms.

B) uncertainty about the behavior of rival firms.

In perfect competition, the firm produces the output such that ________, and in monopoly, the firm produces the output such that ________. A) P > MR = MC; P = MR = MC B) P = MR = MC; P < MR = MC C) P = MR = MC; P > MR = MC D) P = MR = MC; P = MR = MC

C) P = MR = MC; P > MR = MC

An industry with only two firms is generally called: A) a monopoly. B) monopolistic competition. C) a duopoly. D) perfect competition.

C) a duopoly.

In an oligopoly: A) there are many sellers. B) there are no barriers to entry. C) firms recognize their interdependence. D) total surplus is maximized.

C) firms recognize their interdependence.

An industry with a single firm producing a product for which there are no close substitutes and which is protected by barriers to entry is: A) perfect competition. B) monopolistic competition. C) oligopoly. D) monopoly.

D) monopoly.

(Figure: Payoff Matrix for Ajinomoto and ADM) Given the payoff matrix in the figure Payoff Matrix for Ajinomoto and ADM, the optimal combination for maximum combined profit occurs when: A) each firm produces 30 million pounds. B) each firm produces 40 million pounds. C) ADM produces 30 million pounds and Ajinomoto produces 40 million pounds. D) ADM produces 40 million pounds and Ajinomoto produces 30 million pounds.

A) each firm produces 30 million pounds.

The downward-sloping demand curve for a monopolistically competitive firm: A) reflects product differentiation. B) eventually will become perfectly elastic as more firms enter. C) indicates collusion among firms in the industry. D) ensures that the firm will produce at minimum average cost in the long run.

A) reflects product differentiation.

The profit-maximizing rule MR = MC is: A) followed by a monopoly but not by a perfectly competitive firm. B) followed by a perfectly competitive firm but not by a monopoly. C) followed by all types of firms. D) not followed by a monopoly because it would reduce economic profit to zero.

C) followed by all types of firms.

Monopolistic competition describes an industry characterized by a ________ number of firms producing ________ products with ________ for firms. A) small; identical; barriers to entry B) small; similar; relatively easy entry C) large; similar; relatively easy entry D) large; identical; relatively easy entry

C) large; similar; relatively easy entry

An industry with a few interdependent firms is best described as: A) perfect competition. B) monopolistic competition. C) oligopoly. D) monopoly.

C) oligopoly.

A market structure characterized by many competitors, each producing identical products, with free entry and exit into the industry, is described as a(n): A) monopolistically competitive industry. B) oligopoly. C) perfectly competitive industry. D) monopoly.

C) perfectly competitive industry.

The main characteristic that distinguishes monopolistic competition from perfect competition is: A) easy entry and exit. B) many firms. C) differentiated products. D) that in perfect competition, to maximize profits, a firm will produce where MR = MC.

C) differentiated products.

In a monopoly in the long run: A) economic profits will be eliminated by the entry of rival firms. B) economic profits will be reduced but not eliminated entirely by the entry of rival firms. C) entry by other firms will not occur. D) social surplus is maximized.

C) entry by other firms will not occur.