Question 1

Which type of market structure is imperfectly competitive? Oligopoly Monopolistic competition Monopoly

Accepted Answer

A)  I only
B)  II and III only
C)  I and II only
D)  II onlyE) C) and D)
F) B) and D)

Question 2

If a monopolistically competitive firm's demand curve is shifting to the left, it will stop when:

Accepted Answer

A)  firms stop exiting the industry.
B)  firms stop entering the industry.
C)  the firm raises its price.
D)  the firm lowers its price.E) B) and D)
F) None of the above

Question 3

The graph shown displays the cost and revenue curves associated with a monopolistically competitive firm.  In the graph, which area represents deadweight loss?

Accepted Answer

A)  B
B)  C
C)  D
D)  EE) C) and D)
F) A) and C)

Question 4

Firms that are faced with repeating games, such as the prisoner's dilemma:

Accepted Answer

A)  are more likely to collude.
B)  are less likely to collude.
C)  tend to act more like perfectly competitive firms.
D)  are more likely to renege on agreements.E) A) and D)
F) A) and B)

Question 5

The outcome of a competitive oligopoly:

Accepted Answer

A)  is less efficient than that of colluding oligopolists.
B)  is more efficient than that of a perfectly competitive market.
C)  is more efficient than that of a monopolist.
D)  is less efficient than that of a monopolist.E) A) and D)
F) A) and C)

Question 6

The graph shown displays the cost and revenue curves associated with a monopolistically competitive firm.  This firm will produce where _______ equals _______ and will set price according to _______.

Accepted Answer

A)  marginal revenue; marginal cost; average total cost
B)  marginal revenue; marginal cost; demand
C)  demand; marginal cost; marginal revenue
D)  demand; marginal cost; average total costE) None of the above
F) All of the above

Question 7

The prisoner's dilemma shown displays the payoffs associated with two firms: Firm A and Firm B. These firms are in an oligopoly and they can choose to either collude or compete.  Given the payoffs shown, what can we predict Firm A's profits will be?

Accepted Answer

A)  $50 million
B)  $100 million
C)  $200 million
D)  $300 millionE) C) and D)
F) A) and C)

Question 8

If we were to compare the monopolistically competitive firm's long-run outcome to that of a perfectly competitive firm, 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) C) and D)
F) None of the above

Question 9

A market that consists of many small firms:

Accepted Answer

A)  cannot be a monopoly.
B)  must be perfectly competitive.
C)  cannot be a monopolistically competitive market.
D)  can only be an oligopoly.E) A) and B)
F) B) and C)

Question 10

The graph shown displays the cost and revenue curves associated with a monopolistically competitive firm.  If the firm is producing Q1 and charging P3, this graph likely shows the firm's cost and revenue curves in the:

Accepted Answer

A)  short run, and firms will enter this market.
B)  long run, and firms will enter this market.
C)  short run, and firms will leave this market.
D)  long run, and no firms will enter or exit this market.E) All of the above
F) A) and D)

Question 11

Competition between oligopolists drives:

Accepted Answer

A)  price and profits down to below the monopoly level.
B)  price and profits down to the perfect competition level.
C)  some firms out until the market becomes a monopoly.
D)  collusion to happen frequently.E) A) and B)
F) C) and D)

Question 12

A Nash equilibrium occurs when:

Accepted Answer

A)  all players choose the best strategy they can, given the choices made by all of the other players.
B)  one strategy is always the best for a player to choose, regardless of what other players do.
C)  all players follow a "leader" in order to maximize profits.
D)  None of these is true.E) A) and B)
F) A) and C)

Question 13

A market that has no barriers to entry and many small firms selling products that are slightly different from one another is best described as:

Accepted Answer

A)  monopolistic competition.
B)  monopoly.
C)  perfect competition.
D)  oligopoly.E) None of the above
F) B) and D)

Question 14

Monopolistically competitive firms behave like _______ in the short run, but earn profits similar to those earned by _______ in the long run.

Accepted Answer

A)  monopolies; perfectly competitive firms
B)  perfectly competitive firms; monopolies
C)  monopolies; oligopolies
D)  oligopolies; perfectly competitive firmsE) B) and C)
F) All of the above

Question 15

In the long run, a profit-maximizing monopolistically competitive firm sells at a price that is:

Accepted Answer

A)  equal to average total cost.
B)  equal to marginal cost.
C)  below average total cost.
D)  below marginal cost.E) A) and C)
F) None of the above

Question 16

In the long run, a profit-maximizing monopolistically competitive firm sells at a price that is equal to:

Accepted Answer

A)  average total cost, but higher than marginal cost.
B)  marginal cost and marginal revenue.
C)  average total cost, but lower than marginal cost.
D)  demand, but higher than average total cost and marginal cost.E) A) and B)
F) B) and C)

Question 17

The prisoner's dilemma shown displays the payoffs associated with two firms: Firm A and Firm B. These firms are in an oligopoly and they can choose to either collude or compete.  Given the payoffs in this matrix, Firm B:

Accepted Answer

A)  should always choose to collude, regardless of Firm A's actions.
B)  should always choose to compete, regardless of Firm A's actions.
C)  should compete if Firm A competes and collude if Firm A colludes.
D)  should compete if Firm A colludes and collude if Firm A competes.E) A) and D)
F) All of the above

Question 18

The prisoner's dilemma shown displays the payoffs associated with two firms: Firm A and Firm B. These firms are in an oligopoly and they can choose to either collude or compete.  Both of these firms:

Accepted Answer

A)  have a dominant strategy.
B)  have an incentive to renege on collusion.
C)  have an incentive to compete.
D)  All of these are true.E) A) and B)
F) C) and D)

Question 19

The graph shown displays the cost and revenue curves associated with a monopolistically competitive firm.  In the graph, area B represents:

Accepted Answer

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

Question 20

An outcome in which all players choose the best strategy they can, given the choices of all other players, is called:

Accepted Answer

A)  a dominant strategy.
B)  collusion.
C)  a Nash equilibrium.
D)  the prisoner's dilemma.E) A) and C)
F) A) and B)

Exam 15: Monopolistic Competition and Oligopoly

An outcome in which all players choose the best strategy they can, given the choices of all other players, is called:

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The prisoner's dilemma shown displays the payoffs associated with two firms: Firm A and Firm B. These firms are in an oligopoly and they can choose to either collude or compete. Given the payoffs shown, what can we predict Firm A's profits will be?

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The graph shown displays the cost and revenue curves associated with a monopolistically competitive firm. In the graph, area B represents:

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Competition between oligopolists drives:

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Firms that are faced with repeating games, such as the prisoner's dilemma:

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In the long run, a profit-maximizing monopolistically competitive firm sells at a price that is:

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A market that has no barriers to entry and many small firms selling products that are slightly different from one another is best described as:

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If a monopolistically competitive firm's demand curve is shifting to the left, it will stop when:

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In the long run, a profit-maximizing monopolistically competitive firm sells at a price that is equal to:

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

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The graph shown displays the cost and revenue curves associated with a monopolistically competitive firm. This firm will produce where _______ equals _______ and will set price according to _______.

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A Nash equilibrium occurs when:

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The prisoner's dilemma shown displays the payoffs associated with two firms: Firm A and Firm B. These firms are in an oligopoly and they can choose to either collude or compete. Given the payoffs in this matrix, Firm B:

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The graph shown displays the cost and revenue curves associated with a monopolistically competitive firm. In the graph, which area represents deadweight loss?

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Which type of market structure is imperfectly competitive? Oligopoly Monopolistic competition Monopoly

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Monopolistically competitive firms behave like _______ in the short run, but earn profits similar to those earned by _______ in the long run.

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A market that consists of many small firms:

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The graph shown displays the cost and revenue curves associated with a monopolistically competitive firm. If the firm is producing Q1 and charging P3, this graph likely shows the firm's cost and revenue curves in the:

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The outcome of a competitive oligopoly:

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The prisoner's dilemma shown displays the payoffs associated with two firms: Firm A and Firm B. These firms are in an oligopoly and they can choose to either collude or compete. Both of these firms:

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The graph shown displays the cost and revenue curves associated with a monopolistically competitive firm. This firm will produce where ___ equals _ and will set price according to _____.

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Monopolistically competitive firms behave like _ in the short run, but earn profits similar to those earned by _ in the long run.

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