Econ Chapters 16-17

Refer to Figure 16-3.What price will the monopolistically competitive firm charge in this market? a. $60 b. $70 c. $75 d. $80

d.

Entry by new firms into a monopolistically competitive market a. creates additional consumer surplus. b. imposes a positive externality on existing firms. c. leads to the same externalities that are observed when new firms enter a perfectly competitive market. d. increases the demand for existing firms' products.

a.

Examples of monopolistically competitive markets include the markets a. restaurants and furniture. b. wheat and corn. c. postage stamps and wooden pencils. d. All of the above are correct.

a.

Refer to Scenario 16-3.How many double scoop ice cream cones should Peter sell per day to maximize his profit? a. 80 b. 100 c. 120 d. 140

a.

For cartels, as the number of firms (members of the cartel) increases, a. the monopoly outcome becomes more likely. b. the magnitude of the price effect decreases. c. the more concerned each seller is about its own impact on the market price. d.the easier it becomes to observe members violating their agreements.

b.

Refer to Scenario 17-2. Exxoff's dominant strategy would lead to what sort of well-drilling behavior? a. Exxoff will never drill a second well. b. Exxoff will always drill a second well. c. Exxoff will drill a second well only if BQ drills a well. d. Exxoff will drill a second well only if BQ does not drill a well.

b.

Refer to Table 16-1.What is the concentration ratio in Industry B? a. 18% b. 34% c. 61% d. 95%

b.

A monopolistically competitive market has characteristics that are similar to a. a monopoly only. b. a competitive firm only. c. both a monopoly and a competitive firm. d. neither a monopoly nor a competitive firm.

c.

An equilibrium in which each firm in an oligopoly maximizes profit, given the actions of its rivals, is called a. a general equilibrium. b. a dominant equilibrium. c. a Nash equilibrium. d. an oligopoly equilibrium.

c.

Evidence suggests that, in markets with differentiated products but little advertising, a. consumers are not confused by conflicting signals. b. firms are generally less profitable. c. markets are less efficient. d. consumers make better choices.

c.

Refer to Table 17-13. Suppose the owners of Lopes and HomeMax meet for a friendly game of golf one afternoon and happen to discuss a strategy to optimize growth related profit. If they both agree to cooperate on a strategy that maximizes their joint profits, annual profit will grow by a. $1.0 million for Lopes and by $1.5 million for HomeMax. b. $0.4 million for Lopes and by $3.4 million for HomeMax. c. $3.2 million for Lopes and by $0.6 million for HomeMax. d. $2.0 million for Lopes and by $2.5 million for HomeMax.

d.

Refer to Table 17-18.The dominant strategy For Firm A is to produce a. 10 units and the dominant strategy for Firm B is to produce 10 units. b. 10 units and the dominant strategy for Firm B is to produce 12 units. c. 12 units and the dominant strategy for Firm B is to produce 10 units. d. 12 units and the dominant strategy for Firm B is to produce 12 units.

d.

Some firms have an incentive to advertise because they sell a a. homogeneous product and charge a price equal to marginal cost. b. homogeneous product and charge a price above marginal cost. c. differentiated product and charge a price equal to marginal cost. d. differentiated product and charge a price above marginal cost.

d.

The higher the concentration ratio, the a. more control an individual firm has to set prices. b. more competitive the industry. c. less competitive the industry. d. Both a and c are correct.

d.

In general,game theoryis the study of a. how people behave in strategic situations. b. how people behave when the possible actions of other people are irrelevant. c. oligopolistic markets. d. all types of markets, including competitive markets, monopolistic markets, and oligopolistic markets.

a.

In monopolistically competitive markets, economic losses a. suggest that some existing firms will exit the market. b. suggest that new firms will enter the market. c. are minimized through government-imposed barriers to entry. d. are never possible.

a.

Refer to Scenario 16-3.Howmuch profit will Peter earn each day if he chooses the price and quantity that maximize his profit? a. $176 b. $208 c. $225 d. $352

a.

Refer to Scenario 17-2. If BQ and Exxoff are able to successfullycollude to maximize their joint profits, BQ willCorrect Answer a. drill one well and Exxoff will drill one well. b. drillone well and Exxoff will drill two wells. c. drill two wells and Exxoff will drill one well. d. drill two wells and Exxoff will drill two wells.

a.

Refer to Table 16-1.Which industry is the least competitive? a. Industry A b. Industry B c. Industry C d. Industry D

a.

Refer to Table 17-1.If this market for water were perfectly competitive instead of monopolistic, what price would be charged? a. $0 b. $30 c. $40 d. $60

a.

Refer to Table 17-13. When this game reaches a Nash equilibrium, annual profit will grow by a. $1.5 million for HomeMax and by $1.0 million for Lopes. b. $3.4 million for HomeMax and by $0.4 million for Lopes. c. $0.6 million for HomeMax and by $3.2 million for Lopes. d. $2.5 million for HomeMax and by $2.0 million for Lopes.

a.

Refer to Table 17-18.Ifthese two firms agree to cooperate to maximize their joint profit, the outcome of the game will be a. 10 units of output for Firm A and 10 units of output for Firm B. b. 10 units of output for Firm A and 12 units of output for Firm B. c. 12 units of output for Firm A and 10 units of output for Firm B. d. 12 units of output for Firm A and 12 units of output for Firm B.

a.

The prisoners' dilemma provides insights into the a. difficulty of maintaining cooperation. b. benefits of avoiding cooperation. c. benefits of government ownership of monopoly. d. ease with which oligopoly firms maintain high prices.

a.

market.Refer to Figure 16-3.How much consumer surplus will be derived from the purchase of this product at the monopolistically competitive price? a. $200 b. $312.50 c. $400 d. $800

a.

If a monopolistically competitive firm can increase its level of production and lower its average total cost of production at the same time then a. the firm has a product-variety opportunity. b. he firm has excess capacity. c. the firm has a business-stealing opportunity. d. the firm is producing a quantity of output higher than its efficient scale of production.

b.

One characteristic of an oligopoly market structure is: a. firms in the industry are typically characterized by very diverse product lines. b. firms in the industry have some degree of market power. c. products typically sell at a price equal to their marginal cost of production. d. the actions of one seller have no impact on the profitability of other sellers.

b.

Product differentiation in monopolistically competitive markets ensures that, for profit-maximizing firms, a. marginal revenue will equal average total cost. b. price will exceed marginal cost. c. marginal cost will exceed average revenue. d. average variable cost will be declining.

b.

Refer to Scenario 16-3.What price should Peter charge per double scoop ice cream cone to maximize his profit? a. $5.60 b. $4.40 c. $3.20 d. $2.40

b.

Refer to Scenario 16-4. As a result of the new restaurant, diners in Boston are likely to experience a a. product-variety externality, which is a negative externality. b. product-variety externality, which is a positive externality. c. business-stealing externality, which is a negative externality. d. business-stealing externality, which is a positive externality.

b.

Refer to Scenario 17-1. The fact that both countries have colluded to earn higher profit shows their desire to keep their combined level of output a. above the monopoly level. b. below the Nash equilibrium level. c. equal to the Nash equilibrium level. d. above the Nash equilibrium level.

b.

Refer to Table 17-13. If both stores follow a dominant strategy, HomeMax's annual profit will grow by a. $0.6 million. b. $1.5 million. c. $2.5 million. d. $3.4 million.

b.

Referto Table 17-1.If Rochelle and Alec operate as a profit-maximizing monopoly in the market for water, what price will they charge? a. $25 b. $30 c. $35 d. $40

b.

Suppose that Bieber and Rihanna are duopolists in the music industry. In May, they agree to work together as a monopolist, charging the monopoly price for their music and producing the monopoly quantity of songs. By June, each singer is considering breaking the agreement. What would you expect to happen next? a. Bieber and Rihanna will determine that it is in each singer's self interest to maintain the agreement. b. Bieber and Rihanna will each break the agreement. Both singers' profits will decrease.Bieber and Rihanna will each break the agreement. c. Both singers' profits will increase. d. Bieber and Rihanna will each break the agreement. The new equilibrium quantity of songs will increase, and the new equilibrium price also will increase.

b.

The primary purpose of antitrust legislation is to a. protect small businesses. b. protect the competitiveness of U.S. markets. c. protect the prices of American-made products. d. ensure firms earn only a fair profit.

b.

When strategic interactions are important to pricing and production decisions, a typical firm will a. set the price of its product equal to marginal cost. b. consider how competing firms might respond to its actions. c. generally operate as if it is a monopolist. d. consider exiting the market.

b.

Which of the following pairs illustrates the two extreme examples of market structures? a. competition and oligopoly b. competition and monopoly c. monopoly and monopolistic competition d. oligopoly and monopolistic competition

b.

A monopolistically competitive firm chooses the quantity to produce where a. price equals marginal cost. b. demand equals marginal cost. c. marginal revenue equals marginal cost. d. Both a and c are correct.

c.

Assuming that oligopolists do not have the opportunity to collude, once they have reached the Nash equilibrium, it a. is always in their best interest to supply more to the market. b. is always in their best interest to supply less to the market. c. is always in their best interest to leave their quantities supplied unchanged. d. may be in their best interest to do any of the above, depending on market conditions.

c.

Critics of advertising argue that in some markets advertising may a. attract products of lower quality into the market. b. attract less informed buyers into the market. c. decrease elasticity of demand allowing firms to charge a larger markup over marginal cost. d. enhance competition in markets to an unnecessary degree.

c.

Crude oil is primarily supplied to the world market by a few Middle Eastern countries. Such a market is an example of a(n) (i)imperfectly competitive market. (ii)monopoly market. (iii)oligopoly market. a. (i) and (ii) only b. (ii) and (iii) only c. (i) and (iii)only d. (iii) only

c.

Firms that sell highly differentiated consumer goods, such as soft drinks, breakfast cereals, and dog food, typically spend what percent of their revenues on advertising? a. 0-1 b. 2-4 c. 10-20 d. over 50

c.

In an oligopoly, each firm knows that its profits a. depend only on how much output it produces. b. depend only on how much output its rival firms produce. c. depend on both how much output it produces and how much output its rival firms produce. d. will be zero in the long run because of free entry.

c.

In the short run, a firm in a monopolistically competitive market operates much like a a. firm in a perfectly competitive market. b. firm in an oligopoly. c. monopolist. d. monopsonist.

c.

In which of the following market structures can firms earn economic profits in the long run? a. perfect competition b. monopolistic competition c. monopoly d. Both b and c are correct.

c.

Refer to Scenario 17-2. If BQ were to drill a second well, what would its profit be if Exxoff did not drill a second well? a. $43 million b. $67 million c. $86 million d. $129 million

c.

Refer to Table 16-1.What is the concentration ratio in Industry A? a. 38% b. 71% c. 92% d. 98%

c.

Refer to Table 17-13. Increasing the size of its store and parking lot is a dominant strategy for a. Lopes, but not for HomeMax. b. HomeMax, but not for Lopes. c. both stores. d. neither store.

c.

The firm has total fixed costs of $120 and a constant marginal cost of $12 per unit. We can conclude that a. firms will exit this market. b. firms will enter this market. c. this market is in long-run equilibrium. d. this firm is operating at its efficient scale.

c.

The likely outcome of the standard prisoners' dilemma game is that a. neither prisoner confesses. b. exactly one prisoner confesses. c. both prisoners confess. d. Not enough information is given to answer this question.

c.

A special kind of imperfectly competitive market that has only two firms is called a. a two-tier competitive structure. b. an incidental monopoly. c. a doublet. d. a duopoly.

d.

An oligopoly would tend to restrict output and drive up price if a. barriers to entering the industry are negligible. b. firms engage in informative advertising. c. firms produce a standardized product. d. firms collude and behave like a monopoly.

d.

As the number of sellers in an oligopoly becomes very large, a. the quantity of output approaches the socially efficient quantity. b. the price approaches marginal cost. c. the price effect is diminished. d. All of the above are correct.

d.

Consider a market served by a monopolist, Firm A. A new firm, Firm B, enters the market and, as a result, Firm A lowers its price to try to drive FirmB out of the market. This practice is known as a. resale price maintenance. b. predatory tying. c. tying. d. predatory pricing

d.

During the 1990s, the members of OPEC operated independently from one another, causing the world market for crude oil to become close to a. a monopoly market. b. an oligopoly market. c. a duopoly market. d. a competitive market.

d.

Refer to Table 16-1.Which industry is the most competitive? a. Industry A b. Industry B c. Industry C d. Industry D

d.

The story of the prisoners' dilemma shows why a. predatory pricing is clearly not in society's best interest. b. economists are unanimous in condemning resale price maintenance, since it inevitably reduces competition. c. oligopolies can fail to act independently, even when independent decision-making is in their best interest. d. oligopolies can fail to cooperate, even when cooperation is in their best interest.

d.

When firms in a monopolistically competitive market engage in price-related advertising, defenders of advertising argue that a. the quality of products sold in the market always increases. b. customers are less likely to be informed about other characteristics of the product. c. new firms are discouraged from entering the market. d. each firm has less market power.

d.

Which of the following statements about oligopolies is NOT correct? a. An oligopolistic market has only a few sellers. b. The actions of any one seller can have a large impact on the profits of all other sellers. c. Oligopolistic firms are interdependent in a way that competitive firms are not. d. Unlike monopolies and monopolistically competitive markets, oligopolies prices do not exceed their marginal revenues.

d.