Chapter 10 quiz

Which of the following characteristics does monopolistic competition NOT have in common with the model of perfect competition? A) Products of individual firms are different B) Entry and exit are easy C) Individual firms earn normal profits in the long run D) Each firm has an insignificantly small market share

A) Products of individual firms are different

A nash equilibrium

Assumes that each player chooses his or her best strategy

Which of the following characteristics do monopolistically competitive markets and perfectly competitive markets NOT share? A) Zero economic profits in the long run B) Many firms in the market C) Differentiated products D) Ease of entry into the market

C) Differentiated product

The industrial structure of cartels is an example of a

Cooperative game

Which of the following games does NOT describe a Prisoner's Dilemma outcome? A) Cartel members attempting to increase profits by cheating on their production quotas B) Rival department stores agreeing to accept each other's coupons and advertised specials C) Competing electronics stores attempting to undercut each other's prices D) A chicken game where one player backs down while the other player does not

D) A chicken game when one player backs down while the other player does not

Which of the following products would be the MOST differentiated? A) Cotton sold to a fabric maker B) Fabric sold to a garment maker C) Garments sold to a garment distributor D) Garments sold to a retail customer

D) Garments sold to a retail customer

There are 10 burger joints in Eastville and each one sells a slightly different variety of burger. The burger market in Eastville can be characterized by monopolistic competition. The following diagram shows the demand curve for a typical burger joint in this market. Assume that economic profits are negative for the typical burger joint in this market. If the situation persists in the burger market in Eastville, what will happen to the number of burger joints in the market?

Demand shifts right

If firms in a monopolistically competitive industry are experiencing economic losses in the short run, some firms will___ the industry,_____ the demand to each firm in the market until each firm earns a normal profit

Exit; increasing

Nintendo lowers the price of its product by $10, and Sony responds by lowering the price of its own product by $10 forever. This is an example of what type of game strategy?

Grim trigger

If a cartel member is considering cheating in order to earn profits, it should

Increase the quantity it sells at the quota price

Which of the following actions can help increase the stability of a cartel?

Increasing government protection

Perfectly competitive markets will produce ____ in the long run

MC=minimum ATC

Before deciding on a pricing strategy, Worldwide Widgets consults with its market intelligence team to understand what discounts the Gargantuan Gizmo Company is offering. The model that BEST fits this industry is

Oligopoly

If Rosco's Tacos competes with eight other fast-food restaurants in the same neighborhood, and two of those rival firms exit the market, then

Rosco's demand curve will shift to the right

In oligopoly, all the firms

Take their competitors into account when they make pricing decisions

The notion that individuals and firms are compelled to retaliate or punish others for engaging in noncooperative actions, but leaving the door open for future reconciliation, is BEST referred to as a

Tit-for-tat strategy

Nintendo lowers the price of its product to $10, and Sony waits to see whether Nintendo's price cut was a temporary mistake. This is an example of what type of game strategy?

Trembling hand trigger

Monopolistically competitive firms will produce ______ in the long run

Where MC=MR