Question 1

These are the cost and revenue curves associated with a firm.  Assuming the firm in the graph shown is producing Q1 and charging P3,it is likely showing the cost and revenue curves of a monopolistically competitive firm that is:

Accepted Answer

A)   earning positive economic profits.
B)   earning negative economic profits.
C)   earning zero economic profits.
D)   It is impossible to tell from the graph provided.E) A) and B)
F) A) and C)

Question 2

These are the cost and revenue curves associated with a monopolistically competitive firm.  According to the graph shown,area A represents:

Accepted Answer

A)   profits earned in the short and long run.
B)   profits earned in the short run.
C)   profits earned in the long run.
D)   consumer surplus.E) A) and D)
F) A) and B)

Question 3

The long run outcome of the monopolistically competitive firm:

Accepted Answer

A)   is not efficient.
B)   does not maximize profits.
C)   is the same as the short-run outcome.
D)   maximizes total surplus.E) None of the above
F) A) and C)

Question 4

If government were to regulate a monopolistically competitive market by setting a single price,a consequence would be:

Accepted Answer

A)   less product variety.
B)   higher prices.
C)   less output supplied to the market.
D)   All of these statements are true.E) A) and B)
F) B) and D)

Question 5

In an oligopoly,the price effect is:

Accepted Answer

A)   the increase in price from lowering the quantity sold.
B)   the decrease in total revenue that occurs because the increase in quantity will push the market price down.
C)   the increase in total revenue due to the money brought in by the sale of additional units.
D)   the increase in output that comes from raising the price.E) A) and D)
F) A) and C)

Question 6

This prisoner's dilemma game shows the payoffs associated with two firms,A and B,in an oligopoly and their choices to either collude with one another or not.  Given the situation in the matrix shown,the two firms are likely to collude only if:

Accepted Answer

A)   it is a repeated game.
B)   they will only make the decision once.
C)   The two firms will always choose to compete.
D)   they are the only two firms with dominant market share.E) A) and D)
F) B) and C)

Question 7

When a Nash equilibrium is reached:

Accepted Answer

A)   the outcome will only change if the "lead" player changes his strategy.
B)   no one has an incentive to break the equilibrium by changing his strategy.
C)   it must be true that all players have a dominant strategy.
D)   None of these statements is true.E) A) and D)
F) B) and D)

Question 8

The process of entry and exit into a monopolistically competitive market causes:

Accepted Answer

A)   the firm's demand curve to shift left and/or right.
B)   the firm's supply curve to shift left and/or right.
C)   the firm's average total cost curve to shift left and/or right.
D)   the firm's marginal cost curve to shift straight up and/or down.E) A) and B)
F) A) and C)

Question 9

Like the monopolist,the monopolistically competitive firm:

Accepted Answer

A)   faces a downward sloping demand curve.
B)   is a price taker.
C)   sets the price where marginal cost equals marginal revenue; the demand curve doesn't matter.
D)   All of these statements are true.E) A) and B)
F) A) and C)

Question 10

The welfare loss associated with the outcome in a competitive oligopoly is:

Accepted Answer

A)   bigger than that of a monopoly.
B)   smaller than that of a monopoly.
C)   the same as that of a monopoly.
D)   the same as that of colluding oligopolists.E) A) and B)
F) A) and C)

Question 11

If we were to compare the monopolistically competitive firm's long run outcome to that of a perfectly competitive one,we would conclude that the monopolistically competitive firm:

Accepted Answer

A)   creates more total surplus.
B)   produces less.
C)   charges less.
D)   earns greater profits.E) B) and D)
F) C) and D)

Question 12

A dominant strategy is:

Accepted Answer

A)   when one strategy is chosen by a firm first and determines the best strategies of the other players that follow.
B)   when one strategy is chosen and cannot be changed without making at least one of the players worse off.
C)   when one strategy is always the best for a player to choose, regardless of what other players do.
D)   None of these statements is true.E) A) and B)
F) None of the above

Question 13

Long-run economic profits are possible in which of the following market structures?

Accepted Answer

A)   Monopolistic competition
B)   Oligopoly and monopoly
C)   Perfect competition
D)   Only monopolyE) A) and D)
F) All of the above

Question 14

This prisoner's dilemma game shows the payoffs associated with two firms,A and B,in an oligopoly and their choices to either collude with one another or not.  Given the situation in the matrix shown,we can predict that Firm A's profits will be:

Accepted Answer

A)   $50 million.
B)   $100 million.
C)   $200 million.
D)   $300 million.E) None of the above
F) All of the above

Question 15

These are the cost and revenue curves associated with a monopolistically competitive firm.  According to the graph shown,area C represents:

Accepted Answer

A)   producer surplus.
B)   consumer surplus.
C)   deadweight loss.
D)   profits.E) A) and C)
F) C) and D)

Question 16

If firms in a monopolistically competitive market are earning negative economic profits,it is likely that:

Accepted Answer

A)   firms will enter the market.
B)   firms will exit the market.
C)   the firms in the market will shut down immediately.
D)   the firms in the market will expand to try to capture lower costs per unit.E) A) and D)
F) C) and D)

Question 17

For an oligopoly,when the quantity effect outweighs the price effect,the typical firm may find it optimal to:

Accepted Answer

A)   expect firms will enter the industry.
B)   collude.
C)   increase output.
D)   decrease output.E) A) and D)
F) None of the above

Question 18

If a firm's demand curve in a monopolistically competitive market is shifting left:

Accepted Answer

A)   competition is likely entering with similar products.
B)   firms must be exiting the industry.
C)   economic profits must be increasing.
D)   None of these statements is true.E) B) and C)
F) All of the above

Question 19

For the monopolistically competitive firm,the steepness of the demand curve depends on:

Accepted Answer

A)   the steepness of the MC curve.
B)   the number of consumers in the market.
C)   the availability of close substitutes.
D)   None of these statements is correct.E) None of the above
F) A) and B)

Question 20

Monopolistically competitive firms have an incentive to:

Accepted Answer

A)   engage in tactics for bringing in more customers.
B)   advertise.
C)   engage in brand promotion.
D)   All of these statements are true.E) A) and B)
F) A) and C)

Exam 15: Monopolistic Competition and Oligopoly

For the monopolistically competitive firm,the steepness of the demand curve depends on:

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The welfare loss associated with the outcome in a competitive oligopoly is:

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When a Nash equilibrium is reached:

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This prisoner's dilemma game shows the payoffs associated with two firms,A and B,in an oligopoly and their choices to either collude with one another or not. Given the situation in the matrix shown,we can predict that Firm A's profits will be:

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If a firm's demand curve in a monopolistically competitive market is shifting left:

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If government were to regulate a monopolistically competitive market by setting a single price,a consequence would be:

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These are the cost and revenue curves associated with a monopolistically competitive firm. According to the graph shown,area A represents:

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For an oligopoly,when the quantity effect outweighs the price effect,the typical firm may find it optimal to:

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Like the monopolist,the monopolistically competitive firm:

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In an oligopoly,the price effect is:

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Long-run economic profits are possible in which of the following market structures?

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These are the cost and revenue curves associated with a monopolistically competitive firm. According to the graph shown,area C represents:

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These are the cost and revenue curves associated with a firm. Assuming the firm in the graph shown is producing Q1 and charging P3,it is likely showing the cost and revenue curves of a monopolistically competitive firm that is:

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Monopolistically competitive firms have an incentive to:

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If firms in a monopolistically competitive market are earning negative economic profits,it is likely that:

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If we were to compare the monopolistically competitive firm's long run outcome to that of a perfectly competitive one,we would conclude that the monopolistically competitive firm:

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The process of entry and exit into a monopolistically competitive market causes:

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The long run outcome of the monopolistically competitive firm:

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A dominant strategy is:

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This prisoner's dilemma game shows the payoffs associated with two firms,A and B,in an oligopoly and their choices to either collude with one another or not. Given the situation in the matrix shown,the two firms are likely to collude only if:

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