Question 1

If short-run economic profits are greater than zero for firms in a monopolistically competitive market, in the long run we expect:

Accepted Answer

A)  entry barriers to prevent competing firms from entering this market.
B)  the demand curve for firms in the market to shift to the right.
C)  the average cost of production to decrease.
D)  the average cost of production to increase.

Question 2

Suppose that Bill and Ted use a tit-for-tat scheme to encourage cartel pricing and Bill chooses the low price for a single month. Bill and Ted will deviate from cartel pricing for two months.

Accepted Answer

A) True 
 B)False

Question 3

To maximize profit, an unregulated natural monopoly will produce at a level where:

Accepted Answer

A)  marginal revenue is greater than marginal cost.
B)  marginal revenue is greater than average revenue.
C)  marginal revenue is less than marginal cost.
D)  marginal revenue is equal to marginal cost.

Question 4

Which of the following is a characteristic of a monopolistically competitive market? I. Firms sell differentiated products.
II. Each firm earns a positive economic profit in the long-run.
III. Firms freely enter and exit the market.

Accepted Answer

A)  II only
B)  I and II only
C)  I and III only
D)  I, II, and III

Question 5

Figure 8.11
-The path of the game in Figure 8.11 will be:

Accepted Answer

A)  Fred chooses a large quantity and Barney stays out.
B)  Fred chooses a large quantity and Barney enters.
C)  Fred chooses a small quantity and Barney stays out.
D)  Fred chooses a small quantity and Barney enters.

Question 6

Recall the Application about advertising campaigns for movies to answer the following question(s) .
-Recall the Application. Distributors of movies advertise some but not others. Distributors advertise a movie to signal to movie goers that the movie is:

Accepted Answer

A)  a bomb.
B)  appealing and will generate addition ʺbuzzʺ or word of mouth advertising.
C)  a niche movie and the need to inform a certain group about it.
D)  priced such that some consumers may have price resistance if not prodded by advertisements.

Question 7

As firms enter a monopolistically competitive market in the long run:

Accepted Answer

A)  price increases, the market quantity demanded increases, and the quantity supplied by an individual firm increases.
B)  price decreases, the market quantity demanded increases, and the quantity supplied by an individual firm decreases.
C)  price decreases, but firm profits increase as average costs decrease.
D)  price increases and firm profits increase.

Question 8

Recall the Application about the programs developed by NASA to encourage private -sector firms to enter
the market for space flight to answer the following question(s).
-Recall the Application. Once NASA ends the space shuttle program, private -sector firms will be the only firms in the global space-flight market.

Accepted Answer

A) True 
 B)False

Question 9

Under an average-cost pricing policy:

Accepted Answer

A)  a regulatory agency picks a price equal to a natural monopolyʹs marginal cost.
B)  a regulatory agency picks a price equal to a natural monopolyʹs average fixed cost.
C)  a regulatory agency picks a price at which a natural monopolyʹs demand curve intersects its average cost curve.
D)  firms earn economic profits greater than zero.

Question 10

Firm  Market Share (%)  1402303124105563 Table 8.1\begin{array}{l}\begin{array} { c c } \hline 	ext { Firm } & 	ext { Market Share (\%)  } \\hline 1 & 40 \2 & 30 \3 & 12 \4 & 10 \5 & 5 \6 & 3 \\hline\end{array}\	ext { Table } 8.1\end{array} Firm 123456​ Market Share (%)  4030121053​​ Table 8.1​ 
-The four-firm concentration ratio for the market depicted in Table 8.1 is:

Accepted Answer

A)  10%.
B)  40%.
C)  82%.
D)  92%.

Question 11

Even though in oligopoly the actions of one firm has a perceptible effect on the other firms, oligopoly firms act independently.

Accepted Answer

A) True 
 B)False

Question 12

Explain what is meant by predatory pricing, and the inherent difficulties involved with predatory pricing from a firmʹs point of view.

Accepted Answer

Predatory pricing occurs when a firm cha...

Question 13

In the case of a natural monopoly, two firms can produce at lower average cost than one firm can.

Accepted Answer

A) True 
 B)False

Question 14

Examples of monopolistically competitive industries in which firms differentiate their products by offering them at more locations include all of the following EXCEPT:

Accepted Answer

A)  restaurants.
B)  video rental stores.
C)  retail clothing stores.
D)  wheat farms.

Question 15

When two firms in an industry become one firm, they are engaged in:

Accepted Answer

A)  a trust agreement.
B)  a merger.
C)  predatory pricing.
D)  none of the above

Question 16

When a second firm enters a monopolistʹs market,

Accepted Answer

A)  the former monopolistʹs average cost decreases as its output level decreases.
B)  the demand curve facing the former monopolist shifts to the right.
C)  the market price falls.
D)  none of the above

Question 17

Figure 8.6
-Figure 8.6 depicts a monopolistically competitive firm in the long run. Illustrate on the graph the firmʹs price and output level in long-run equilibrium. Explain.

Accepted Answer

<img  loading="lazy" src="/assets/images/blured-textbook.svg" class="d-inline m-1" alt="blured image" width="139" height="30"> As illustrated on the graph, the firm p...

Question 18

Figure 8.13
-Consider an unregulated monopoly in Figure 8.13. Suppose that a second firm enters the market. As a result, if a natural monopoly is inevitable in this market,

Accepted Answer

A)  the demand curve facing each firm lies entirely above the long-run average cost curve.
B)  the demand curve facing each firm lies entirely below the long -run average cost curve.
C)  the demand curve facing each firm touches the long-run average cost curve at one point.
D)  none of the above

Question 19

Government agencies often regulate the price natural monopolies charge because, if left unregulated, natural monopolies will:

Accepted Answer

A)  charge a price greater than average cost.
B)  charge a price less than average cost.
C)  charge a price equal to average cost.
D)  face too many competitors.

Question 20

An arrangement under which a number of firms acts as a single firm and coordinate their pricing decisions is:

Accepted Answer

A)  a monopoly.
B)  monopolistic competition.
C)  price fixing.
D)  perfect competition.

Exam 8: Market Entry, Monopolistic Competition, and Oligopoly

Which of the following is a characteristic of a monopolistically competitive market? I. Firms sell differentiated products. II. Each firm earns a positive economic profit in the long-run. III. Firms freely enter and exit the market.

Correct Answer
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Even though in oligopoly the actions of one firm has a perceptible effect on the other firms, oligopoly firms act independently.

Correct Answer
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$\begin{array}{l}\begin{array} { c c } \hline \text { Firm } & \text { Market Share (\%) } \\\hline 1 & 40 \\2 & 30 \\3 & 12 \\4 & 10 \\5 & 5 \\6 & 3 \\\hline\end{array}\\\text { Table } 8.1\end{array}$ -The four-firm concentration ratio for the market depicted in Table 8.1 is:

Correct Answer
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As firms enter a monopolistically competitive market in the long run:

Correct Answer
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If short-run economic profits are greater than zero for firms in a monopolistically competitive market, in the long run we expect:

Correct Answer
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Explain what is meant by predatory pricing, and the inherent difficulties involved with predatory pricing from a firmʹs point of view.

Correct Answer
verified
Predatory pricing occurs when a firm cha...
View Answer

Under an average-cost pricing policy:

Correct Answer
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Correct Answer
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When two firms in an industry become one firm, they are engaged in:

Correct Answer
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Government agencies often regulate the price natural monopolies charge because, if left unregulated, natural monopolies will:

Correct Answer
verified

When a second firm enters a monopolistʹs market,

Correct Answer
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Figure 8.13 -Consider an unregulated monopoly in Figure 8.13. Suppose that a second firm enters the market. As a result, if a natural monopoly is inevitable in this market,

Correct Answer
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Figure 8.6 -Figure 8.6 depicts a monopolistically competitive firm in the long run. Illustrate on the graph the firmʹs price and output level in long-run equilibrium. Explain.

Correct Answer
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As illustrated on the graph, the firm p...
View Answer

In the case of a natural monopoly, two firms can produce at lower average cost than one firm can.

Correct Answer
verified

Suppose that Bill and Ted use a tit-for-tat scheme to encourage cartel pricing and Bill chooses the low price for a single month. Bill and Ted will deviate from cartel pricing for two months.

Correct Answer
verified

Figure 8.11 -The path of the game in Figure 8.11 will be:

Correct Answer
verified

Examples of monopolistically competitive industries in which firms differentiate their products by offering them at more locations include all of the following EXCEPT:

Correct Answer
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An arrangement under which a number of firms acts as a single firm and coordinate their pricing decisions is:

Correct Answer
verified

Recall the Application about advertising campaigns for movies to answer the following question(s) . -Recall the Application. Distributors of movies advertise some but not others. Distributors advertise a movie to signal to movie goers that the movie is:

Correct Answer
verified

To maximize profit, an unregulated natural monopoly will produce at a level where:

Correct Answer
verified

Exam 8: Market Entry, Monopolistic Competition, and Oligopoly

Which of the following is a characteristic of a monopolistically competitive market? I. Firms sell differentiated products. II. Each firm earns a positive economic profit in the long-run. III. Firms freely enter and exit the market.

Correct AnswerverifiedShow Answer

Even though in oligopoly the actions of one firm has a perceptible effect on the other firms, oligopoly firms act independently.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

As firms enter a monopolistically competitive market in the long run:

Correct AnswerverifiedShow Answer

If short-run economic profits are greater than zero for firms in a monopolistically competitive market, in the long run we expect:

Correct AnswerverifiedShow Answer

Explain what is meant by predatory pricing, and the inherent difficulties involved with predatory pricing from a firmʹs point of view.

Correct AnswerverifiedPredatory pricing occurs when a firm cha...View AnswerShow Answer

Under an average-cost pricing policy:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

When two firms in an industry become one firm, they are engaged in:

Correct AnswerverifiedShow Answer

Government agencies often regulate the price natural monopolies charge because, if left unregulated, natural monopolies will:

Correct AnswerverifiedShow Answer

When a second firm enters a monopolistʹs market,

Correct AnswerverifiedShow Answer

Figure 8.13 -Consider an unregulated monopoly in Figure 8.13. Suppose that a second firm enters the market. As a result, if a natural monopoly is inevitable in this market,

Correct AnswerverifiedShow Answer

Figure 8.6 -Figure 8.6 depicts a monopolistically competitive firm in the long run. Illustrate on the graph the firmʹs price and output level in long-run equilibrium. Explain.

Correct Answerverified As illustrated on the graph, the firm p...View AnswerShow Answer

In the case of a natural monopoly, two firms can produce at lower average cost than one firm can.

Correct AnswerverifiedShow Answer

Suppose that Bill and Ted use a tit-for-tat scheme to encourage cartel pricing and Bill chooses the low price for a single month. Bill and Ted will deviate from cartel pricing for two months.

Correct AnswerverifiedShow Answer

Figure 8.11 -The path of the game in Figure 8.11 will be:

Correct AnswerverifiedShow Answer

Examples of monopolistically competitive industries in which firms differentiate their products by offering them at more locations include all of the following EXCEPT:

Correct AnswerverifiedShow Answer

An arrangement under which a number of firms acts as a single firm and coordinate their pricing decisions is:

Correct AnswerverifiedShow Answer

Recall the Application about advertising campaigns for movies to answer the following question(s) . -Recall the Application. Distributors of movies advertise some but not others. Distributors advertise a movie to signal to movie goers that the movie is:

Correct AnswerverifiedShow Answer

To maximize profit, an unregulated natural monopoly will produce at a level where:

Correct AnswerverifiedShow Answer

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Predatory pricing occurs when a firm cha...
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As illustrated on the graph, the firm p...
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