Test Review

Which of the following is the best example of oligopoly?

automobile manufacturing

If the number of firms in a monopolistically competitive industry increases and the degree of product differentiation diminishes:

the industry would more closely approximate pure competition

The monopolistic competition model predicts that:

firms will engage in nonprice competition.

A significant difference between a monopolistically competitive firm and a purely competitive firm is that the:

former sells similar, although not identical, products.

The Herfindahl index for a pure monopolist is:

10,000

The term oligopoly indicates:

A few firms producing either a differentiated or homogeneous product.

Which of the following companies most closely approximates a differentiated oligopolist in a highly concentrated industry?

Ford Motor Company

The copper, aluminum, cement, and industrial alcohol industries are examples of:

Homogeneous oligopoly

Which of the following statements concerning a monopolistically competitive industry is correct?

If there are short-run losses, firms will leave the industry and the demand curves of the remaining firms will shift to the right.

Which of the following statement is correct?

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.

Aluminum competes with copper in the market for power transmission lines. This illustrates:

Interindustry competition.

The monopolistically competitive seller maximizes profit by producing at the point where:

Marginal revenue equals marginal cost.

Clear-cut mutual interdependence with respect to the price-output policies exists in:

Oligopoly

Barriers to entry in oligopolistic industries may consist of:

Ownership of essential resources.

Which of the following is correct for a monopolistically competitive firm in long-run equilibrium?

P exceeds minimum ATC

Which of the following companies most closely approximates a homogenous oligopolist in a highly concentrated industry?

Pittsburgh Plate Glass

For a monopolistically competitive firm in long-run equilibrium:

Price will equal average total cost

In an oligopolistic market:

Products may be standardized or differentiated.

Which company most closely approximates a monopolistic competitor?

Subway Sandwiches

If the four-film concentration ratio for industry X is 80:

The four largest firms account for 80 percent of total sales

Which of the following is correct?

The greater the degree o product variation, the greater is the excess capacity problem.

Oligopoly is difficult to analyze primarily because:

The price and output decisions of any one firm depend on the reactions of its rivals

List characteristics of monopolistic competition?

The use of trademarks and brand names Product differentiation A relatively large number of sellers Relatively easy entry to the industry

If there are significant economies of scale in an industry, then:

a firm that is large may e able to produce at a lower unit cost that can a small firm

Oligopolistic industries are characterized by:

a few dominant firms and substantial entry barriers.

A monopolistically competitive industry combines elements of both competition and monopoly. It is correct to say that the competitive element results from:

a relatively large number of firms and the monopolistic element from product differentiation.

The mutual interdependence that characterized oligopoly arises because:

a small number of firms produce a large proportion of industry output

In long-run equilibrium, a monopolistically competitive firm sets its price:

above marginal cost

Monopolistic competition resembles pure competition because:

barriers to entry are neither weak or nonexistent.

The economic inefficiencies of monopolistic competition may be offset by the fact that:

consumers have a number of variations of the product from which to choose.

The automobile, household appliance, and automobile tire industries are all illustrations of:

differentiated oligopoly

The price elasticity of monopolistically competitive firm's demand curve varies:

directly with the number of competitors, but inversely with the degree of product differentiation.

Inefficiencies occur under monopolistic competition because:

each firm's downsloping demand curve is tangent to the ATC curve in the long run.

In long-run equilibrium both purely competitive and monopolistically competitive firms will:

equate marginal cost and marginal revenue.

In long-run equilibrium a monopolistically competitive firm's price will:

exceed MC, but equal ATC

The less elastic a monopolistic competitor's long-run demand curve, the:

greater its excess capacity.

Industries X and Y both have four-firm concentration ratios of 65 percent, but the Herfindahl index for X is 1,500 while that for Y is 2,000. These data suggest:

greater market power in Y than X.

A significant benefit of monopolistic competition compared with pure competition is:

greater product variety.

In long-run equilibrium a monopolistically competitive firm will:

have excess production capacity.

A monopolistically competitive firm has a:

highly elastic demand curve

In short-run equilibrium, the price charged by the monopolistically competitive firm:

may be either equal to ATC, less than ATC, or more than ATC

In the short run a monopolistically competitive firm's economic profit:

may be positive, zero, or negative.

Oligopolistic industries:

may produce either standardized or differentiated products.

Economic analysis of monopolistically competitive industry is more complicated than that of pure competition because:

of product differentiation and consequent product promotion activities.

Concentration ratios measure the:

percentage of total sales accounted for by the four largest firms in the industry.

In the long run a monopolistically competitive firm:

produces where P=ATC

Differentiated oligopoly exists where a small number of firms are:

producing goods that differ in terms of quality and design.

Homogeneous oligopoly exists where a small number of firms are:

producing virtually identical products.

A monopolistically competitive industry combines elements of both competition and monopoly. The monopoly element results from:

product differentiation

Which of the following is an illustration of differentiated oligopoly?

the soft drink industry

Monopolistically competitive and purely competitive industries are similar in that:

there are few, if any, barriers to entry.

In monopolistically competitive markets resources are:

underallocated because long-run equilibrium occurs where price exceeds marginal cost.

In the long run,new firms will enter a monopolistically competitive industry:

until economic profits are zero.

In long-run equilibrium, the price changed by the monopolistically competitive firm:

will be equal to ATC

A monopolistically competitive firm's marginal revenue curve:

is downsloping and lies below the demand curve.

Monopolistic competition is characterized by a:

large number of firms and low entry barriers

The monopolistically competitive seller's demand curve will become more elastic the:

larger the number of competitiors

The more elastic monopolistic competitor's long-run demand curve, the:

lower its average total cost at its equilibrium level of output.

Monopolistic competition means:

many firms producing differentiated products.

When a monopolistically competitive firm is in long-run equilibrium:

marginal revenue equals marginal cost and price equals average total cost. MR=MC & P> minimum ATC

Monopolistically competitive firms:

may realize either profits or losses in the short run, but realize normal profits in the long run.

Product variety is likely to be greater in:

monopolistic competition that in pure competition.

Monopolistically competitive industries are inefficient because:

monopolistically competitive industries are overpopulated with firms whose plants are underutilized.

The demand curve of a monopolistically competitive producer is:

more elastic than that of a pure monopolist, but less elastic than that of a pure competitor.

Mutual interdependence means that each oligopolistic firm:

must consider the reactions of its rivals when it determines its price policy.

Which of the following is a unique feature of oligopoly?

mutual interdependence

In long-run equilibrium a monopolistically competitive producer achieves:

neither productive efficiency nor allocative efficiency.

Oligopoly is more difficult to analyze than other market models because:

of mutual interdependence and the fact that oligopoly outcomes are less certain than in other market models.

Nonprice competition refers to:

Advertising, product promotion, and changes in the real or perceived characteristics of a product. Product development, advertising, and product packaging.

The book publishing, furniture, and clothing industries are each illustrations of:

Monopolistic competition

Under monopolistic competition entry to the industry is:

More difficult than under pure competition but not nearly as difficult as under pure monopoly

The larger the number of firms and the smaller the degree of product differentiation the:

More elastic is the monopolistically competitive firm's demand curve

In which of these continuums of degrees of competition (highest to lowest) is oligopoly properly placed?

Pure competition, monopolistic competition, oligopoly, pure monopoly

In which of the following market models do demand and marginal revenue diverge?

Pure monopoly, oligopoly, and monopolistic competition

In short-run equilibrium, a monopolistically competitive firm set its price:

above marginal cost.

which of the following industries is an illustration of homogeneous oligopoly?

aluminum

Excess capacity refers to the:

amount by which actual production falls short of the minimum ATC output.

In long-run equilibrium monopolistic competition entails:

an underallocation of resources

In comparing the demand curve of a pure monopolist with that of a monopolistically competitive firm, we would expect the monopolistic competitor to have a:

generally more elastic demand curve.

Prices are likely to be least flexible:

in oligopoly

As a general rule, oligopoly exists when the four-firm concentration ratio:

is 40 percent or more

An industry having a four-firm concentration ratio of 85%:

is an oligopoly

If some firms leave a monopolistically competitive industry, the demand curves of the remaining firms will:

shift to the right

Other things equal, if more firms enter a monopolistically competitive industry:

the demand cures facing existing firms would shift to the left.