Question 1

A significant criticism of the Cournot model is that:

Accepted Answer

A)  markets do not operate according to the Cournot model in the real world.
B)  its key assumption does not hold if the market is still adjusting toward equilibrium.
C)  firms cannot estimate reaction curves of other firms.
D)  the Cournot model cannot be applied to industries with more than two firms.E) B) and C)
F) A) and D) B

Question 2

Unlike a perfectly competitive firm,a monopolistically competitive firm:

Accepted Answer

A)  makes zero economic profits in the short run.
B)  caters to a large portion of the market.
C)  does not face barriers to entry and exit.
D)  sells a differentiated product.E) A) and B)
F) B) and C)

Question 3

In the Stackelberg model of oligopoly,the dominant firm:

Accepted Answer

A)  will equate marginal cost with the residual demand curve to maximize profits.
B)  faces a perfectly elastic demand curve.
C)  can maximize profits ignoring the actions of other firms in the industry.
D)  faces a marginal revenue curve that lies under the residual demand curve.E) A) and B)
F) A) and C)

Question 4

Long-run equilibrium under monopolistic competition is characterized by:

Accepted Answer

A)  a positive deadweight loss.
B)  a positive but small economic profit.
C)  an equilibrium price that is equal to marginal cost.
D)  an equilibrium price that is greater than average cost.E) A) and D)
F) B) and D)

Question 5

In the dominant firm model of oligopoly,the rival firms will:

Accepted Answer

A)  equate marginal cost with marginal revenue.
B)  produce at the point where marginal cost is equal to residual demand.
C)  produce on the inelastic portion of the demand curve.
D)  equate marginal cost with the dominant firm's price.E) B) and C)
F) A) and D)

Question 6

Which of the following,if true,will be the best example of an oligopoly market?

Accepted Answer

A)  The cigarette industry where a similar product is produced by a small number of sellers
B)  Dine-in pizza outlets where a differentiated product is produced by a large number of sellers
C)  The milk industry where a homogeneous product is provided by a large number of sellers
D)  The market for electricity where a single firm can produce electricity at the lowest possible costE) All of the above
F) C) and D)

Question 7

The output of a monopolistically competitive industry is inefficient because firms:

Accepted Answer

A)  produce at the highest point on the average cost curve.
B)  do not produce at the minimum point on their average cost curve.
C)  produce at the highest point on the marginal cost curve.
D)  do not produce at the minimum point on the marginal cost curve.E) None of the above
F) A) and D)

Question 8

Unlike monopolistically competitive firms,oligopolistic firms:

Accepted Answer

A)  face a downward-sloping demand curve.
B)  exhibit a strong mutual interdependence.
C)  produce at the point where price is equal to marginal cost.
D)  do not have a supply curve.E) A) and B)
F) B) and D) B

Question 9

From the shape of the monopolistically competitive firm's demand curve,you can imply that:

Accepted Answer

A)  the firm has some degree of market power.
B)  the firm sells a homogeneous good.
C)  the firm's product has no substitutes.
D)  the firm's level of output is efficient.E) All of the above
F) B) and C)

Question 10

Which of the following is true of a firm in an oligopoly market?

Accepted Answer

A)  Each firm faces a downward-sloping demand curve with a kink at the current price.
B)  Firms in oligopoly markets are very small relative to the market.
C)  Products in oligopoly markets could either be differentiated or homogeneous.
D)  The profit-maximizing output is determined by equating price and marginal cost.E) A) and C)
F) C) and D)

Question 11

Using a graph,show the equilibrium price and output for a perfectly competitive firm.If all the firms in the industry colluded to increase their profits,how would the equilibrium change for each firm? Assume that each firm produces an equal share of the industry output.

Accepted Answer

In a perfectly competitive industry with...

Question 12

Assume that there are only three sellers in the aluminum industry each producing identical aluminum sheets.Given that these three firms own all the known sources of aluminum,the _____ model of the market is most applicable to the aluminum industry.

Accepted Answer

A)  oligopoly
B)  monopoly
C)  dominant firm model
D)  monopolistic competitionE) All of the above
F) A) and D)

Question 13

Which of the following would weaken the argument that monopolistically competitive firms should be regulated by the government?

Accepted Answer

A)  Monopolistically competitive firms and perfectly competitive firms are similar in that their equilibrium prices and quantities are efficient.
B)  Monopolistically competitive firms earn zero economic profits in the short run just as perfectly competitive firms do.
C)  The benefits of increased product variety produced by monopolistic competition offsets the relatively small welfare costs.
D)  The cost of regulating a monopolistically competitive firm could possibly be lower than the deadweight loss from monopolistic competition.E) A) and B)
F) B) and C)

Question 14

In the Stackelberg model,the leader firm's residual demand curve _____.

Accepted Answer

A)  has a slope that is twice that of the market demand curve
B)  has a slope that is half the slope of the market demand curve
C)  is the same as the market demand curve
D)  is more inelastic than the market demand curveE) B) and C)
F) A) and C)

Question 15

Which of the following is a defining characteristic of an oligopoly?

Accepted Answer

A)  A large number of sellers
B)  Mutual interdependence between firms
C)  Economies of scale in production
D)  A large number of buyersE) A) and B)
F) A) and C)

Question 16

Use the following figure to answer the question : Figure 13-1 :  shows the Stackelberg model of a duopoly.Both firms face constant marginal costs equal to OJ and the market demand curve is AD.The Stackelberg firm produces an output of OF and OF is equal to FL. 
-Refer to Figure 13-1.The Stackelberg firm's residual demand curve is given by:

Accepted Answer

A)  AC
B)  BCD
C)  BE
D)  JCDE) None of the above
F) B) and C)

Question 17

A monopolistically competitive firm is similar to a monopoly in that the firm:

Accepted Answer

A)  has no rivals that produce close substitutes.
B)  is very large relative to the market.
C)  produces on the inelastic portion of its demand curve.
D)  faces a downward-sloping demand curve.E) A) and D)
F) B) and C) D

Question 18

Long-run equilibrium in a monopolistically competitive market satisfies all of the following conditions,except:

Accepted Answer

A)  zero economic profit.
B)  excess capacity.
C)  price equal to marginal cost.
D)  marginal revenue equal to marginal cost.E) A) and B)
F) A) and C)

Question 19

Which of the following the best example of a cartel?

Accepted Answer

A)  An association of tobacco companies that attempts to influence anti-tobacco legislation
B)  A labor union that raises wages above competitive level by restricting the supply of labor
C)  A group of countries that sign an agreement to lower trade barriers and exchange goods and services
D)  Firms that register their headquarters in the Cayman Islands in order to evade corporate taxesE) A) and D)
F) B) and C)

Question 20

The demand curve that a monopolistically competitive firm faces is _____.

Accepted Answer

A)  relatively elastic compared to a monopoly
B)  perfectly elastic at the equilibrium price
C)  relatively elastic compared to a perfectly competitive firm
D)  perfectly inelastic at the equilibrium outputE) C) and D)
F) All of the above

Exam 13: Monopolistic Competition and Oligopoly

A significant criticism of the Cournot model is that:

Correct Answer
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B

Unlike a perfectly competitive firm,a monopolistically competitive firm:

Correct Answer
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In the Stackelberg model of oligopoly,the dominant firm:

Correct Answer
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Long-run equilibrium under monopolistic competition is characterized by:

Correct Answer
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In the dominant firm model of oligopoly,the rival firms will:

Correct Answer
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Which of the following,if true,will be the best example of an oligopoly market?

Correct Answer
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The output of a monopolistically competitive industry is inefficient because firms:

Correct Answer
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Unlike monopolistically competitive firms,oligopolistic firms:

Correct Answer
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B

From the shape of the monopolistically competitive firm's demand curve,you can imply that:

Correct Answer
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Which of the following is true of a firm in an oligopoly market?

Correct Answer
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Using a graph,show the equilibrium price and output for a perfectly competitive firm.If all the firms in the industry colluded to increase their profits,how would the equilibrium change for each firm? Assume that each firm produces an equal share of the industry output.

Correct Answer
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In a perfectly competitive industry with...
View Answer

Assume that there are only three sellers in the aluminum industry each producing identical aluminum sheets.Given that these three firms own all the known sources of aluminum,the _____ model of the market is most applicable to the aluminum industry.

Correct Answer
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Which of the following would weaken the argument that monopolistically competitive firms should be regulated by the government?

Correct Answer
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In the Stackelberg model,the leader firm's residual demand curve _____.

Correct Answer
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Which of the following is a defining characteristic of an oligopoly?

Correct Answer
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A monopolistically competitive firm is similar to a monopoly in that the firm:

Correct Answer
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D

Long-run equilibrium in a monopolistically competitive market satisfies all of the following conditions,except:

Correct Answer
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Which of the following the best example of a cartel?

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The demand curve that a monopolistically competitive firm faces is _____.

Correct Answer
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Exam 13: Monopolistic Competition and Oligopoly

A significant criticism of the Cournot model is that:

Correct AnswerverifiedB

Unlike a perfectly competitive firm,a monopolistically competitive firm:

Correct AnswerverifiedShow Answer

In the Stackelberg model of oligopoly,the dominant firm:

Correct AnswerverifiedShow Answer

Long-run equilibrium under monopolistic competition is characterized by:

Correct AnswerverifiedShow Answer

In the dominant firm model of oligopoly,the rival firms will:

Correct AnswerverifiedShow Answer

Which of the following,if true,will be the best example of an oligopoly market?

Correct AnswerverifiedShow Answer

The output of a monopolistically competitive industry is inefficient because firms:

Correct AnswerverifiedShow Answer

Unlike monopolistically competitive firms,oligopolistic firms:

Correct AnswerverifiedB

From the shape of the monopolistically competitive firm's demand curve,you can imply that:

Correct AnswerverifiedShow Answer

Which of the following is true of a firm in an oligopoly market?

Correct AnswerverifiedShow Answer

Using a graph,show the equilibrium price and output for a perfectly competitive firm.If all the firms in the industry colluded to increase their profits,how would the equilibrium change for each firm? Assume that each firm produces an equal share of the industry output.

Correct AnswerverifiedIn a perfectly competitive industry with...View AnswerShow Answer

Assume that there are only three sellers in the aluminum industry each producing identical aluminum sheets.Given that these three firms own all the known sources of aluminum,the _____ model of the market is most applicable to the aluminum industry.

Correct AnswerverifiedShow Answer

Which of the following would weaken the argument that monopolistically competitive firms should be regulated by the government?

Correct AnswerverifiedShow Answer

In the Stackelberg model,the leader firm's residual demand curve _____.

Correct AnswerverifiedShow Answer

Which of the following is a defining characteristic of an oligopoly?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A monopolistically competitive firm is similar to a monopoly in that the firm:

Correct AnswerverifiedD

Long-run equilibrium in a monopolistically competitive market satisfies all of the following conditions,except:

Correct AnswerverifiedShow Answer

Which of the following the best example of a cartel?

Correct AnswerverifiedShow Answer

The demand curve that a monopolistically competitive firm faces is _____.

Correct AnswerverifiedShow Answer

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B

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B

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In a perfectly competitive industry with...
View Answer

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D

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