question

Which of the following statements concerning a monopolistically competitive industry is correct?

A. If there are short-run losses, firms will leave the industry and the demand curves of the remaining firms will shift to the right

If there are short-run economic profits, firms will enter the industry and the demand curves of existing firms will shift to the right.

If there are short-run losses, firms will leave the industry and the demand curves of the remaining firms will shift to the left.

If there are short-run economic profits, firms will leave the industry and the demand curves of the remaining firms will shift to the right.

A. If there are short-run losses, firms will leave the industry and the demand curves of the remaining firms will shift to the right

If there are short-run economic profits, firms will enter the industry and the demand curves of existing firms will shift to the right.

If there are short-run losses, firms will leave the industry and the demand curves of the remaining firms will shift to the left.

If there are short-run economic profits, firms will leave the industry and the demand curves of the remaining firms will shift to the right.

answer

A

question

Refer to the diagram for a monopolistically competitive firm in short-run equilibrium. This firm will realize an economic

loss of $320.

profit of $480.

profit of $280.

profit of $600.

loss of $320.

profit of $480.

profit of $280.

profit of $600.

answer

loss 480

question

In the long run, economic theory predicts that a monopolistically competitive firm will

earn an economic profit.

realize all economies of scale.

equate price and marginal cost.

D. have excess production capacity.

earn an economic profit.

realize all economies of scale.

equate price and marginal cost.

D. have excess production capacity.

answer

D

question

Compared to a purely competitive firm in long-run equilibrium, the monopolistic competitor has a

lower price and lower output.

B. higher price and lower output.

higher price and higher output.

price and output that may be higher or lower.

lower price and lower output.

B. higher price and lower output.

higher price and higher output.

price and output that may be higher or lower.

answer

B

question

In the short run, a profit-maximizing monopolistically competitive firm sets it price

equal to marginal revenue.

equal to marginal cost.

C. above marginal cost.

below marginal cost.

equal to marginal revenue.

equal to marginal cost.

C. above marginal cost.

below marginal cost.

answer

C

question

Refer to the payoff matrix. Suppose that Alpha and Beta agree that they will both pursue a high-price strategy. If Beta then cheats on the agreement in order to increase profits, which of the following is true?

A. If this is a repeated game, Alpha can be expected to pursue a low-price strategy in future games.

If this is a one-time game, a Nash equilibrium will result.

A Nash equilibrium cannot be reached through repeated playing of this game.

The game is a negative-sum game.

A. If this is a repeated game, Alpha can be expected to pursue a low-price strategy in future games.

If this is a one-time game, a Nash equilibrium will result.

A Nash equilibrium cannot be reached through repeated playing of this game.

The game is a negative-sum game.

answer

A

question

If a particular bank regularly announces changes in its interest rate schedules before its competitors, who then set rates very close to those announced by that bank, this could be described as

markup pricing.

predatory pricing.

price leadership.

explicit price collusion.

markup pricing.

predatory pricing.

price leadership.

explicit price collusion.

answer

C

question

If the several oligopolistic firms that compose an industry behave collusively, the resulting price and output will most likely resemble those of

bilateral monopoly.

pure monopoly.

monopolistic competition.

pure competition.

bilateral monopoly.

pure monopoly.

monopolistic competition.

pure competition.

answer

B

question

In which of these continuums of degrees of competition (lowest to highest) is oligopoly properly placed?

pure monopoly, monopolistic competition, oligopoly, pure competition

oligopoly, pure competition, monopolistic competition, pure monopoly

monopolistic competition, pure competition, pure monopoly, oligopoly

D. pure monopoly, oligopoly, monopolistic competition, pure competition

pure monopoly, monopolistic competition, oligopoly, pure competition

oligopoly, pure competition, monopolistic competition, pure monopoly

monopolistic competition, pure competition, pure monopoly, oligopoly

D. pure monopoly, oligopoly, monopolistic competition, pure competition

answer

D

question

One would expect that collusion among oligopolistic producers would be easiest to achieve in which of the following cases?

a rather large number of firms producing a differentiated product

a very small number of firms producing a differentiated product

a rather large number of firms producing a homogeneous product

D. a very small number of firms producing a homogeneous product

a rather large number of firms producing a differentiated product

a very small number of firms producing a differentiated product

a rather large number of firms producing a homogeneous product

D. a very small number of firms producing a homogeneous product

answer

D