AGB 144 Ch 11

When a monopolistically competitive firm is in long-run equilibrium: A. P = MC = ATC. B. MR = MC and minimum ATC > P. C. MR > MC and P = minimum ATC. D. MR = MC and P > minimum ATC.

A. P = MC = ATC.

The kinked-demand curve of an oligopolist is based on the assumption that: A. competitors will follow a price cut but ignore a price increase. B. competitors will match both price cuts and price increases. C. competitors will ignore a price cut but follow a price increase. D. there is no product differentiation.

A. competitors will follow a price cut but ignore a price increase.

Game theory: A. is the analysis of how people (or firms) behave in strategic situations. B. is best suited for analyzing purely competitive markets. C. reveals that mergers between rival firms are self-defeating. D. reveals that price-fixing among firms reduces profits.

A. is the analysis of how people (or firms) behave in strategic situations.

Which of the following is a unique feature of oligopoly? A. mutual interdependence B. advertising expenditures C. product differentiation D. nonprice competition

A. mutual interdependence

Refer to the above diagram for a monopolistically competitive firm in short-run equilibrium. The profit-maximizing output for this firm will be: A. 100. B. 160. C. 180. D. 210.

B. 160.

A breakdown in price leadership leading to successive rounds of price cuts is known as: A. limit pricing B. a price war C. informal pricing D. price discrimination

B. a price war

Which of the following is the best example of oligopoly? A. women's dress manufacturing B. automobile manufacturing C. restaurants D. cotton farming

B. automobile manufacturing

In the United States cartels are: A. quite common in industries that produce nondurable goods. B. in violation of the antitrust laws. C. concentrated in monopolistically competitive industries. D. encouraged by government policy so firms can achieve economies of scale.

B. in violation of the antitrust laws.

Cartels are difficult to maintain in the long run because: A. they are illegal in all industrialized countries. B. individual members may find it profitable to cheat on agreements. C. it is more profitable for the industry to charge a lower price and produce more output. D. entry barriers are insignificant in oligopolistic industries.

B. individual members may find it profitable to cheat on agreements.

Under monopolistic competition entry to the industry is: Under monopolistic competition entry to the industry is: 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. more difficult than under pure competition but not nearly as difficult as under pure monopoly.

Refer to the above diagram for a monopolistically competitive firm in short-run equilibrium. This firm will realize an economic: A. loss of $320. B. profit of $480. C. profit of $280. D. profit of $600.

B. profit of $480.

Refer to the above diagram for a monopolistically competitive firm in short-run equilibrium. This firm's profit-maximizing price will be: A. $10. B. $13. C. $16. D. $19.

C. $16.

Which of the following statements is correct? A. Purely competitive firms, monopolistically competitive firms, and pure monopolies all earn zero economic profits in the long run. B. Purely competitive firms, monopolistically competitive firms, and pure monopolies all earn positive economic profits in the long run. C. In the long run purely competitive firms and monopolistically competitive firms earn zero economic profits, while pure monopolies may or may not earn economic profits. D. Monopolistically competitive firms earn zero economic profits in both the short run and the long run.

C. In the long run purely competitive firms and monopolistically competitive firms earn zero economic profits, while pure monopolies may or may not earn economic profits.

The term oligopoly indicates: A. a one-firm industry. B. many producers of a differentiated product. C. a few firms producing either a differentiated or a homogeneous product. D. an industry whose four-firm concentration ratio is low.

C. a few firms producing either a differentiated or a homogeneous product.

OPEC provides an example of: A. an unwritten, informal understanding. B. noncollusive oligopoly. C. an international cartel. D. a monopolistically competitive industry.

C. an international cartel.

Monopolistic competition is characterized by a: A. few dominant firms and low entry barriers. B. large number of firms and substantial entry barriers. C. large number of firms and low entry barriers. D. few dominant firms and substantial entry barriers.

C. large number of firms and low entry barriers.

The monopolistically competitive seller maximizes profit by producing at the point where: A. total revenue is at a maximum. B. average costs are at a minimum. C. marginal revenue equals marginal cost. D. price equals marginal revenue.

C. marginal revenue equals marginal cost.

Monopolistically competitive firms: A. realize normal profits in the short run but losses in the long run. B. incur persistent losses in both the short run and long run. C. may realize either profits or losses in the short run, but realize only accounting profits in the long run. D. persistently realize economic profits in both the short run and long run.

C. may realize either profits or losses in the short run, but realize only accounting profits in the long run.

The restaurant, legal assistance, and clothing industries are each illustrations of: A. countervailing power. B. homogeneous oligopoly. C. monopolistic competition. D. pure monopoly.

C. monopolistic competition.

Long-run equilibrium for a monopolistically competitive firm where economic profits are zero results from: A. rising marginal costs. B. a perfectly elastic product demand curve. C. relatively easy entry. D. product differentiation and development.

C. relatively easy entry.

Monopolistic competition resembles pure competition because: A. both industries emphasize nonprice competition. B. in both instances firms will operate at the minimum point on their long-run average total cost curves. C. both industries entail the production of differentiated products. D. barriers to entry are either weak or nonexistent.

D. barriers to entry are either weak or nonexistent.

The study of how people (or firms) behave in strategic situations is called: A. cost-benefit analysis. B. recursive analysis. C. normative economics. D. game theory.

D. game theory.

In which of these continuums of degrees of competition (highest to lowest) is oligopoly properly placed? A. pure competition, oligopoly, pure monopoly, monopolistic competition B. oligopoly, pure competition, monopolistic competition, pure monopoly C. monopolistic competition, pure competition, pure monopoly, oligopoly D. pure competition, monopolistic competition, oligopoly, pure monopoly

D. pure competition, monopolistic competition, oligopoly, pure monopoly

Nonprice competition refers to: A. competition between products of different industries, for example, competition between aluminum and steel in the manufacture of automobile parts. B. price increases by a firm that are ignored by its rivals. C. advertising, product promotion, and changes in the real or perceived characteristics of a product. D. reductions in production costs that are not reflected in price reductions.

C. advertising, product promotion, and changes in the real or perceived characteristics of a product.