Chapter 14, 15, 16, 17
a group of suppliers that tries to act as if they were a monopoly
A cartel is a: A) group of suppliers that tries to act as if they were a monopoly B) market that is dominated by a small number of firms C) market with a large number of firms selling similar but not identical products D) group of suppliers that tries to act as if they were a perfectly competitive market
of product differentiation, some people will prefer their product.
A monopolistic competitive firm is able to charge P>MC because:
B) MR=MC
A monopolistically competitive firm operates where: A) MR<MC B) MR=MC C) MR>MC D) MR+MC=0
persuasive advertising that may actually increase consumer well-being
Advertising designed to link fond lifetime memories with the use of a product is a form of:
infers that the seller expects the product to make a big splash.
Advertising:
stays the same
As more firms enter a monopolistically competitive market, the market demand curve:
have more of an incentive to advertise
Firms that expect their products to be successful
They inform consumers through advertising.
How do monopolistically competitive firms inform consumers about their products?
sell less output.
If a monopolistically competitive firm raises prices, it will:
expects the product to be successful
If consumers observe a lot of advertising for a product, they can infer that the producer:
Berlin, Germany
In 2010, which was the location of more advertisement for the iPad?
Persuasion
In No Logo, Naomi Klein criticizes companies that prioritized the brand name over quality of their product. What function of advertising is Klein concerned about?
P>AC
In a monopolistically competitive market, new firms will enter the market as long as: A)P>AC B) P=AC C) P<AC D) P=MC
zero profits on average, and consumers have strong preferences about where they eat.
In a stable, monopolistically competitive market for restaurants there are:
monopolistic competitive
In the 1990's, fast food restaurants refused to make special orders - there was no way to "hold the tomatoes." When Burger King branded itself as the place where you could "have it your way" and allowed special orders, it enjoyed an advantage over other fast food restaurants. Until other firms copied it, what was Burger King's position?
Zero consumer surplus
In the case of perfectly price-discriminating monopoly, there is •zero consumer surplus •as much consumer surplus as in the case of perfect competition •as much consumer surplus as in the case of a standard monopoly
improves the competitive process by educating the consumer about prices and new products.
Informative advertising:
perfect competition and monopolies
Monopolistic competition combines features of:
many firms, downward-sloping demand curves, and zero economic profit in the long run.
Monopolistic competition in a market is characterized by:
A) many sellers, free entry, and product differentiation
Monopolistic competition is a market that has: A) many sellers, free entry, and product differentiation B) few sellers, free entry, and product differentiation. C) many sellers, high barriers to entry, and product differentiation. D) many sellers, free entry, and identical products.
highly
Monopolistic competitive products are usually _____ advertised.
P > MC, causing an inefficiently lower level of output
Monopolistically competitive firms are able to charge:
a small deadweight loss
Monopolistically competitive firms create:
positive profits cause competitors to enter the market, decreasing demand for each individual firm
Monopolistically competitive firms earn zero profits on average because:
positive profits cause competitors to enter the market, decreasing demand for each individual firm
Monopolistically competitive firms earn zero profits on average because: A) they price above marginal cost B) new firms cannot enter the market C) positive profits cause competitors to enter the market, decreasing demand for each individual firm D) they price at marginal cost
greater than marginal cost
Monopolistically competitive firms set price:
not at all
Perfectly competitive firms advertise:
make people feel good about a product, and this is potentially valuable
Persuasive ads:
can create market power for firms through brand differentiation
Persuasive advertising:
lowers prices and increases consumer welfare
Price advertising typically:
A) price of $16 in Market A and $10 in Market B
Refer to figure-Price Discriminating Monopolist. In order to maximize profits, the monopolist should charge a: A)price of $16 in Market A and $10 in Market B B) uniform price of $6 in both markets C) price of $14 in Market A and $9 in Market B D) price of $16 in Market A and $6 in Market B
decrease to the point that P = AC.
See Figure - Monopolistic Competition Suppose the figure represents a firm that operates in a monopolistic competitive market. In the long run you would expect prices in this market to:
long-run; $14
See figure - Monopolistic Competition II The monopolistically competitive firm in this diagram is in ______ equilibrium and charging a price of ______.
demand to decrease and price to fall to the point that P = AC.
See figure - Monopolistic Competition. Suppose the figure represents a firm that operates in a monopolistic competitve market. In this market, in the long run you would expect:
more firms to enter the market
See figure Monopolistic Competition- Suppose the figure represents a firm that operates in a monopolistically competitive market. In the long run you would expect:
D) I, II, and III
Sometimes advertising is simply about trying to change our minds. An example of this with respect to Coca-Cola include the following previous slogans: I. The pause that refreshes II. Coca-Cola hits the spot, for only a nickel you get a lot III. Things go better with Coca-Cola A) I and II only B) I and III only C) II and III only D) I, II, and III
informative advertising; decrease prices
States allowing firms in certain industries to advertise prices, a form of _______, has been found to ______.
bundled goods are sold one to one, while tied goods are sold one to many
The difference between tying and bundling is that: A)bundled goods are sold one to many, while tied goods are sold one to one. B) bundled goods are sold one to one, while tied goods are sold one to many. C) bundling is more restrictive than tying. D) tying is more restrictive than bundling.
both firms set the price at the high price
With price matching plus 10% of the difference the equilibrium will occur when: A) both firms set the price at the high price. B) firm A sets the price at the high price, and firm B sets the price at the low price. C) firm A sets the price at the low price, and firm B sets the price at the low price. D) both firms set the price at the low price.
B) I and III only
cartel agreements tend to fail: I. if they produce manufactured rather than natural goods. II. if they produce natural rather than manufactured goods III. in the long run as demand curves become more elastic A)I only B) I and III only C) II and III only D) III only
are frequently displaced
companies that compete for the market and win: A) stay on top forever B) are frequently displaced C) face no subsequent competition D) are free to raise prices as much as they want
have more of an incentive to advertise
firms that expect their product to be successful: A) have more of an incentive to advertise B) have less of an incentive to advertise C) will only participate in price advertising D) can better signal the quality of their product if they do NOT advertise
price
if a firm has an average product that is not much better than what other firms produce they may wish to focus their advertising on: A) quality B) price C) deceiving customers D) product information
the best product might not be the most popular product
in a network good's market: A) the output is usually split evenly among many different sellers B) the best product might not be the most popular product C) there is fierce competition "in the market" D) the government is the low-cost leader
it must be difficult for other firms to sell the second good.
in order for a firm to successfully use tying: A-the firm must sell the base good for 50% more than the second good. B-The firm must sell the base good at a lower price than the second good. C) the firm must charge the same price for the base good and the second good. D) it must be difficult for other firms to sell the second good.
high fixed costs
in the case of cable television, contestability is often hampered by: A) high variable costs B) low variable costs C) high fixed costs D) low fixed costs
highly
monopolistic competitive products are usually_______advertised A) never B) rarely C) occasionally D) highly
popularity is less important than musicianship
which is false A) music is a network good B)some musicians get lucky and become popular quickly C)popularity is less important than musicianship D) a musician's current success is no guarantee of future success
"network effects" tend to limit the size of the firm
which of the following is NOT a result of the network effect? A) facebook is more valuable to a person the more friends use it B) eBay is more valuable to a buyer the more sellers there are C) eBay is more valuable to a seller the more buyers there are D) "network effects" tend to limit the size of the firm
cheating
which of the following makes a cartel short-lived? A) stable market demand B) few firms in the cartel C) cheating D) contracting
quiet study rooms
which one would not be considered a network good? A) cell phones B) quiet study rooms C) e-mail programs D) online player versus player games
D) I II and III
Which of the following is/are TRUE? I. Advertising embodies both information and persuasion. II. Perfectly competitive firms and monopolistically competitive firms both advertise. III. Monopolies and monopolistically competitive firms both advertise.
If we had perfect competition instead of monopolistic competition, we would not have all the variety and innovation that we have today.
Why might the benefits of monopolistic competition outweigh the inefficiencies?
C) II and III only
Which of the following is/are TRUE regarding monopolistic competition? I. few sellers II. free entry III. product differentiation A) III only B) I and III only C) II and III only D) I, II, and III
sodas
An example of a monopolistic competitive industry is:
C) I and III only
Which of the following is/are TRUE? I. A monopolistic competitive firm sets price > MC. II. A monopolistic competitive firm sets price =MC. III. A monopolistic competitive firm operates at MC = MR. A) I only B) II only C) I and III only D) II and III only
monopolistically competitive
Bottled water is produced in a _______ ______ manner.
because it leads to lower prices for some products
Consumers benefit for advertising:
D) I, II, III, and IV
Consumers benefit from advertising: I. by gaining product information. II. by being persuaded to try a new product they might like. III. when the ad provides a signal of the product's quality. IV. if the ad leads to a lower price for the product. A) IV only B) II and III only C) I and II only D) I, II, III, and IV
downward-sloping; zero
Under steady state monopolistic competition firms face ________ demand and earn _______ economic profits on average.
people would buy the consoles as low-cost computers, never buy any games, and the console-maker would lose money.
Video game consoles are routinely sold below cost, and games are sold above cost. What would happen if someone figured out how to use the consoles as cost-effective, general-purpose, nongaming computers? •people would buy the consoles as low-cost computers, never buy any games, and the console-maker would lose money. •the console maker would make more money since it would sell more consoles. •the console maker would lower the price on its consoles to sell more of them to a more elastic market
product differentiation
What is the main difference between a perfectly competitive industry and a monopolistically competitive firm?
the idea that the product is expected to be very popular for a long time
When an advertisement serves as a signaling device, it provides potential customers with:
D) a small oil well
Which of the following is NOT an example of product differentiation? A) Shell versus Chevron B) Coca-Cola versus Pepsi C) Levi's versus American Eagle D) a small oil well
D) They are all examples of product differentiation.
Which of the following is NOT an example of product differentiation? A) Shell versus Chevron B) Coca-cola versus Pepsi C) Levi's versus American Eagle D) They are all examples of product differentiation.
C) Apple iPhones
Which of the following is NOT subsidized through advertising? A) Google searches B) cable TV C) Apple iPhones D) The Wall Street Journal
C) restaurants
Which of the following is the best example of a monopolistic competitive market? A) diamonds B) produce C) restaurants D) milk
B) II only
Which of the following is/are TRUE of monopolistic competition? I. Monopolistic competitive firms do not produce at the minimum of their average cost curves. II. Monopolistic competitive firms produce at the minimum of their average cost curves. III. Monopolistic competitive firms earn higher profits than monopolies. A) I only B) II only C) I and III only D) II and III only
