Question 1

A cartel:

Accepted Answer

A)   is a group of buyers formally agreeing to buy product at a certain price.
B)   is a group of firms formally agreeing to control their price and output that is legal in all countries.
C)   is a group of firms formally agreeing to control their price and quality of their product, which is illegal in many countries.
D)   is a group of firms formally agreeing to control their price and output levels, which is illegal in many countries.E) None of the above
F) All of the above

Question 2

Which of the following is true for a firm operating under perfect competition, monopolistic competition and monopoly?

Accepted Answer

A)   Firms earn positive economic profits in the long run.
B)   Firms earn zero economic profits in the long run.
C)   Profits are maximised when marginal cost equals marginal revenue.
D)   Price equals marginal cost.E) B) and C)
F) A) and B)

Question 3

Suppose that a firm raises the price of its product by 10 per cent. Although it has no requirement or agreement to do so, the other firms decide to raise their prices accordingly. This situation is best described as:

Accepted Answer

A)   price leadership.
B)   a cartel.
C)   monopolistic competition.
D)   a market with kinked demand.E) B) and C)
F) C) and D)

Question 4

The number of sellers is the largest in oligopoly.

Accepted Answer

A) True 
 B)False

Question 5

Narrbegin Exhibit 9.1 A monopolistic competitive firm  
-In the long run, the demand curve for the monopolistically competitive firm shown in Exhibit 9.1:

Accepted Answer

A)   shifts leftward.
B)   remains the same.
C)   shifts rightward.
D)   is not possible to predict.E) A) and C)
F) A) and B)

Question 6

The key difference(s)  between perfect competition and monopolistic competition is:

Accepted Answer

A)   that a monopolistically competitive firm is a price taker, whereas a perfectly competitive firm is a price maker.
B)   that a monopolistically competitive firm is a price maker, the same as a perfectly competitive firm is a price maker.
C)   that a monopolistically competitive firm can raise its price and still retain someCustomers.
D)   that if a monopolistically competitive firm raises its price it will lose all customers.E) A) and D)
F) A) and C)

Question 7

A cartel is a legal agreement among firms to innovate and advertise.

Accepted Answer

A) True 
 B)False

Question 8

Narrbegin Exhibit 9.2 A monopolistically competitive firm  
-As presented in Exhibit 9.2, the long-run profit-maximising output for the monopolistically competitive firm is:

Accepted Answer

A)   zero units per week.
B)   100 units per week.
C)   200 units per week.
D)   300 units per week.E) None of the above
F) A) and D)

Question 9

Suppose an oil cartel has an agreement to restrict members' production in order to maintain a price of $40 per barrel. A single cartel member may want to cheat and exceed its quota so that it can:

Accepted Answer

A)   reduce its costs.
B)   charge higher prices.
C)   make demand more inelastic.
D)   earn a bigger profit.E) All of the above
F) A) and B)

Question 10

In the long run, the economic profits of Hoot's Chicken'n'Ribs, a monopolistic competitor, are:

Accepted Answer

A)   not eliminated, because competition is not perfect.
B)   not eliminated, because the demand curve slopes downward.
C)   eliminated due to firms entering the industry.
D)   eliminated due to firms leaving the industry.E) None of the above
F) A) and D)

Question 11

Cartel pricing refers to the output and price choice of a cartel. This choice most closely resembles:

Accepted Answer

A)   a more competitive industry.
B)   a godfather oligopoly.
C)   a duopoly.
D)   a monopoly.E) None of the above
F) All of the above

Question 12

In the short run, the monopolistically competitive firm will charge a price equal to marginal cost.

Accepted Answer

A) True 
 B)False

Question 13

As a result of a kinked demand curve, the price:

Accepted Answer

A)   fluctuates.
B)   falls below the kink.
C)   rises above the kink.
D)   settles at the kink.E) A) and B)
F) C) and D)

Question 14

Monopolistic competition has the following characteristics:

Accepted Answer

A)   one large buyer.
B)   many firms and consumers with differentiated products.
C)   a homogeneous product.
D)   difficult entry and exit.E) A) and C)
F) B) and D)

Question 15

Which of the following statements best describes firms under monopolistic competition?

Accepted Answer

A)   There is little price or quality competition.
B)   Firms compete using quality, location, advertising and price.
C)   Firms do not compete using advertising.
D)   There is little competition between firms.E) None of the above
F) B) and D)

Question 16

Narrbegin Exhibit 9.3 Kinked demand curves 1. B)  follow along demand curve D2. C)  ignore this price increase and cause the price-raising firm to move along D1. D)  ignore this price increase and cause the price-raising firm to move along D2." class="answers-bank-image d-inline" rel="preload" > 
-In Exhibit 9.3, the exhibit represents a kinked-demand oligopoly model. Suppose the current price is $50. If one firm in the oligopoly now attempts to raise its price, all firms will:

Accepted Answer

A)   follow along demand curve D1.
B)   follow along demand curve D2.
C)   ignore this price increase and cause the price-raising firm to move along D1.
D)   ignore this price increase and cause the price-raising firm to move along D2.E) A) and D)
F) A) and C)

Question 17

Which of the following statements best describes the price, output and profit conditions of monopolistic competition?

Accepted Answer

A)   Price will equal marginal cost at the profit-maximising level of output; and profits will be positive in the long run.
B)   Price will always equal average variable cost in the short run and either profits or losses may result in the long run.
C)   Marginal revenue will equal marginal cost in the short run, profit-maximising level of output; and in the long run, economic profit will be zero.
D)   Marginal revenue will equal average total cost in the short run; and long-run economic profits will be zero.E) C) and D)
F) B) and D)

Question 18

Homogeneous product and a large number of sellers and buyers are all characteristics of:

Accepted Answer

A)   oligopolies.
B)   monopolistic competition.
C)   monopolies.
D)   perfect competition.E) A) and C)
F) C) and D)

Question 19

An oligopoly is characterised by having:

Accepted Answer

A)   a low-concentration ratio and a few large independent firms.
B)   a high-concentration ratio and a few large independent firms.
C)   many small firms that cannot dominate the market.
D)   a few large independent firms.E) A) and B)
F) A) and C)

Question 20

Game theory provides a framework for studying:

Accepted Answer

A)   games and attitudes.
B)   relationships within the firm.
C)   output decisions in perfect competition.
D)   strategic behaviour in an oligopoly.E) A) and C)
F) B) and D)

Exam 10: Monopolistic Competition and Oligopoly

Monopolistic competition has the following characteristics:

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Narrbegin Exhibit 9.1 A monopolistic competitive firm -In the long run, the demand curve for the monopolistically competitive firm shown in Exhibit 9.1:

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Suppose that a firm raises the price of its product by 10 per cent. Although it has no requirement or agreement to do so, the other firms decide to raise their prices accordingly. This situation is best described as:

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In the long run, the economic profits of Hoot's Chicken'n'Ribs, a monopolistic competitor, are:

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The key difference(s) between perfect competition and monopolistic competition is:

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Which of the following statements best describes firms under monopolistic competition?

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Game theory provides a framework for studying:

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Suppose an oil cartel has an agreement to restrict members' production in order to maintain a price of $40 per barrel. A single cartel member may want to cheat and exceed its quota so that it can:

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As a result of a kinked demand curve, the price:

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Cartel pricing refers to the output and price choice of a cartel. This choice most closely resembles:

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In the short run, the monopolistically competitive firm will charge a price equal to marginal cost.

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Homogeneous product and a large number of sellers and buyers are all characteristics of:

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Which of the following is true for a firm operating under perfect competition, monopolistic competition and monopoly?

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Which of the following statements best describes the price, output and profit conditions of monopolistic competition?

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An oligopoly is characterised by having:

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Narrbegin Exhibit 9.2 A monopolistically competitive firm -As presented in Exhibit 9.2, the long-run profit-maximising output for the monopolistically competitive firm is:

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The number of sellers is the largest in oligopoly.

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A cartel is a legal agreement among firms to innovate and advertise.

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Narrbegin Exhibit 9.3 Kinked demand curves -In Exhibit 9.3, the exhibit represents a kinked-demand oligopoly model. Suppose the current price is $50. If one firm in the oligopoly now attempts to raise its price, all firms will:

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A cartel:

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