question
Goods that are similar but are not perfect substitutes are called−−−−−−−−−goods
A. differentiated
B. homogeneous
C. normal
D. inferior
A. differentiated
B. homogeneous
C. normal
D. inferior
answer
A. differentiated
question
Which of the following is an example of differentiated goods?
A. Books and cosmetics
B. Fuel and water
C. Potatoes grown by different farmers
D. Tea and energy drinks
A. Books and cosmetics
B. Fuel and water
C. Potatoes grown by different farmers
D. Tea and energy drinks
answer
D. Tea and energy drinks
question
−−−−−−−−−is the market structure in which there are a few rival firms.
A. Perfect competition
B. Monopolistic competition
C. Monopoly
D. Oligopoly
A. Perfect competition
B. Monopolistic competition
C. Monopoly
D. Oligopoly
answer
D. Oligopoly
question
Which of the following markets is an example of an oligopoly?
A. The market for premium apparels
B. The market for books
C. The market for video games
D. The market for wheat
A. The market for premium apparels
B. The market for books
C. The market for video games
D. The market for wheat
answer
A. The market for premium apparels
question
−−−−−−−−−is the market structure in which there are many rival firms producing differentiated products.
A. Perfect competition
B. Monopolistic competition
C. Monopoly
D. Oligopoly
A. Perfect competition
B. Monopolistic competition
C. Monopoly
D. Oligopoly
answer
B. Monopolistic competition
question
Which of the following is an example of a monopolistically competitive market?
A. The market for wheat
B. The market for coffee beans
C. The market for shampoo
D. The market for premium cars
A. The market for wheat
B. The market for coffee beans
C. The market for shampoo
D. The market for premium cars
answer
C. The market for shampoo
question
Which of the following is a feature of an oligopoly market?
A. There is a large number of sellers in this market
B. There are no barriers to entry in this market
C. Each firm in this market earns zero economic profits
D. Each firm's action affects the decisions of its rival
A. There is a large number of sellers in this market
B. There are no barriers to entry in this market
C. Each firm in this market earns zero economic profits
D. Each firm's action affects the decisions of its rival
answer
D. Each firm's action affects the decisions of its rival
question
There are two firms in an industry and their products are perfect substitutes for each other. Each firm had a market share of 50% and charged equal prices. However, when the demand for the good declined due to a recession, Firm A lowered its price to increase sales. Firm B responded by lowering its price further. This is an example of the−−−−−−−−−of oligopoly
A. Bertrand model
B. Cournot
C. Ricardian
D. Keynesian
A. Bertrand model
B. Cournot
C. Ricardian
D. Keynesian
answer
A. Bertrand model
question
In a duopoly with homogeneous products, the best response of a firm is to charge a lower price than its rival as long as−−−−−−−−−.
A. the rival's price is above marginal cost
B. the rival's price is below marginal cost
C. the rival's price is above average cost
D. the rival's price is below average cost
A. the rival's price is above marginal cost
B. the rival's price is below marginal cost
C. the rival's price is above average cost
D. the rival's price is below average cost
answer
A. the rival's price is above marginal cost
question
La Dila and Swiss Pro are the only two firms in an industry. The firms initially charge equal prices for their products, which are perfect substitutes. What happens if La Dila decides to lower its price slightly?
A. La Dila will lose all its market share
B. Swiss Pro will gain market share
C. La Dila will face the entire market demand
D. Swiss Pro will earn positive economic profits
A. La Dila will lose all its market share
B. Swiss Pro will gain market share
C. La Dila will face the entire market demand
D. Swiss Pro will earn positive economic profits
answer
C. La Dila will face the entire market demand
question
In an oligopoly with differentiated products, firms−−−−−−−−−.
A. make positive economic profits
B. incur losses
C. earn zero economic profits
D. do not face competition from its rivals
A. make positive economic profits
B. incur losses
C. earn zero economic profits
D. do not face competition from its rivals
answer
A. make positive economic profits
question
Which of the following is true of a duopoly with differentiated products?
A. A firm loses all its customers when its rival lowers the price of its product
B. A firm does not lose all its customers when its rival lowers the price of its product
C. A firm faces a perfectly elastic demand curve
D. A firm faces a perfectly inelastic demand curve
A. A firm loses all its customers when its rival lowers the price of its product
B. A firm does not lose all its customers when its rival lowers the price of its product
C. A firm faces a perfectly elastic demand curve
D. A firm faces a perfectly inelastic demand curve
answer
B. A firm does not lose all its customers when its rival lowers the price of its product
question
There are a few firms in the automobile industry in Portland. In order to prevent aprice war, these firms have secretly agreed to charge a price 20% above the marginal cost ofproduction. This is an example of−−−−−−−−−.
A. free riding
B. undercutting
C. collusion
D. cost-cutting
A. free riding
B. undercutting
C. collusion
D. cost-cutting
answer
C. collusion
question
A collusion breaks down if−−−−−−−−−.
A. a firm charges a price higher than the price set by the other colluding firms
B. a firm charges a price lower than the price set by the other colluding firms
C. the price set by the colluding firms equals the marginal cost of production
D. the price set by the colluding firms exceeds the marginal cost of production
A. a firm charges a price higher than the price set by the other colluding firms
B. a firm charges a price lower than the price set by the other colluding firms
C. the price set by the colluding firms equals the marginal cost of production
D. the price set by the colluding firms exceeds the marginal cost of production
answer
B. a firm charges a price lower than the price set by the other colluding firms
question
An oligopoly model in which sellers compete on quantities rather than prices is called a−−−−−−−−−model.
A. Bertrand
B. Cournot
C. Ricardian
arD. Keynesian
A. Bertrand
B. Cournot
C. Ricardian
arD. Keynesian
answer
B. Cournot
question
Which of the following is true of monopolistic competition?
A. There is only one seller in this market structure.
B. The product sold by each seller in this market structure is identical.
C. The firms in this market structure earn huge economic profits in the long run
D. There are a large number of sellers each selling a differentiated product
A. There is only one seller in this market structure.
B. The product sold by each seller in this market structure is identical.
C. The firms in this market structure earn huge economic profits in the long run
D. There are a large number of sellers each selling a differentiated product
answer
D. There are a large number of sellers each selling a differentiated product
question
A monopolistically competitive firm always faces a(n)−−−−−−−−−.
A. horizontal demand curve
B. vertical demand curve
C. upward sloping demand curve
D. downward sloping demand curve
A. horizontal demand curve
B. vertical demand curve
C. upward sloping demand curve
D. downward sloping demand curve
answer
D. downward sloping demand curve
question
A profit-maximizing monopolistic competitor continues production until−−−−−−−−−.
A. marginal revenue exceeds marginal cost
B. marginal revenue equals marginal cost
C. marginal revenue exceeds average revenue
D. marginal revenue equals average revenue
A. marginal revenue exceeds marginal cost
B. marginal revenue equals marginal cost
C. marginal revenue exceeds average revenue
D. marginal revenue equals average revenue
answer
B. marginal revenue equals marginal cost
question
A monopolistically competitive firm makes positive economic profits if−−−−−−−−−.
A. price is less than average total cost
B. price is higher than average total cost
C. price equals marginal cost
D. price equals average fixed cost
A. price is less than average total cost
B. price is higher than average total cost
C. price equals marginal cost
D. price equals average fixed cost
answer
B. price is higher than average total cost
question
Refer to the figure above. What does the region ABDC indicate?
A. Economic profit
B. Loss incurred by the producer
C. Consumer surplus
D. Deadweight loss
A. Economic profit
B. Loss incurred by the producer
C. Consumer surplus
D. Deadweight loss
answer
A. Economic Profit
question
Suppose a monopolistic competitor produces 2,000 units of the good in equilibrium and charges a price of $10 for each unit. If the average total cost of producing 2,000 units of the good is $6, what is the total profit earned by the producer?
A. $8,000
B. $4,000
C. $2,000
D. $20,000
A. $8,000
B. $4,000
C. $2,000
D. $20,000
answer
A. 8000
question
A monopolistically competitive firm shuts down in the short run if−−−−−−−−−.
A. marginal revenue equals marginal cost
B. total revenues do not cover variable costs
C. marginal revenue covers average fixed costs
D. average total cost exceeds price
A. marginal revenue equals marginal cost
B. total revenues do not cover variable costs
C. marginal revenue covers average fixed costs
D. average total cost exceeds price
answer
B. total revenues do not cover variable costs
question
Scenario: The fixed cost of producing 500 units of Good Y is $25,000, while the variable cost of producing 500 units of Good Y is $60,000.
Refer to the scenario above. If the market for Good Y is monopolistically competitive, a firm producing Good Y will shut down production in the short run if price falls below−−−−−−−−−.
A. $60
B. $200
C. $120
D. $50
Refer to the scenario above. If the market for Good Y is monopolistically competitive, a firm producing Good Y will shut down production in the short run if price falls below−−−−−−−−−.
A. $60
B. $200
C. $120
D. $50
answer
D. $50
question
Scenario: The fixed cost of producing 500 units of Good Y is $25,000, while the variable cost of producing 500 units of Good Y is $60,000.
Which of the following will happen if the equilibrium price charged by the firm in the short run is $130?.
A. The firm will earn positive economic profits and continue production
B. The firm will incur a loss but continue production
C. New firms will enter the industry in the long run
D. All firms will incur losses in the long run
Which of the following will happen if the equilibrium price charged by the firm in the short run is $130?.
A. The firm will earn positive economic profits and continue production
B. The firm will incur a loss but continue production
C. New firms will enter the industry in the long run
D. All firms will incur losses in the long run
answer
B. The firm will incur a loss but continue production
question
Scenario: The fixed cost of producing 500 units of Good Y is $25,000, while the variable cost of producing 500 units of Good Y is $60,000.
If the equilibrium price charged by the firm in the shortrun is $170, the firm will earn−−−−−−−−−.
A. a profit of $10 per unit
B. a profit of $25 per unit
C. a profit of $0 per unit
D. a profit of $30 per unit
If the equilibrium price charged by the firm in the shortrun is $170, the firm will earn−−−−−−−−−.
A. a profit of $10 per unit
B. a profit of $25 per unit
C. a profit of $0 per unit
D. a profit of $30 per unit
answer
C. a profit of $0 per unit
question
Scenario: The fixed cost of producing 500 units of Good Y is $25,000, while the variable cost of producing 500 units of Good Y is $60,000.
A firm producing Good Y will−−−−−−−−−.
A. earn economic profits if it charges a price of 120
B. incur losses if it charges a price of $200
C. earn zero economic profits if it charges a price of $170
D. shut down production if price falls below $200
A firm producing Good Y will−−−−−−−−−.
A. earn economic profits if it charges a price of 120
B. incur losses if it charges a price of $200
C. earn zero economic profits if it charges a price of $170
D. shut down production if price falls below $200
answer
C. earn zero economic profits if it charges a price of $170
question
Scenario: The fixed cost of producing 500 units of Good Y is $25,000, while the variable cost of producing 500 units of Good Y is $60,000.
A firm producing Good Y will continue production in the short run if total revenue exceeds−−−−−−−−−.
A. $25,000
B. $60,000
C. $85,000
D. $35,000
A firm producing Good Y will continue production in the short run if total revenue exceeds−−−−−−−−−.
A. $25,000
B. $60,000
C. $85,000
D. $35,000
answer
A. $25,000
question
A monopolistic competitor exits the industry in the long run if−−−−−−−−−.
A. total revenue exceeds total cost
B. total costs exceed total revenue
C. marginal revenue exceeds marginal cost
D. marginal revenue equals marginal cost
A. total revenue exceeds total cost
B. total costs exceed total revenue
C. marginal revenue exceeds marginal cost
D. marginal revenue equals marginal cost
answer
B. total costs exceed total revenue
question
A firm is said to have market power if it charges a price−−−−−−−−−of production.
A. higher than the marginal cost
B. lower than the marginal cost
C. equal to the marginal cost
D. equal to the average fixed cost
A. higher than the marginal cost
B. lower than the marginal cost
C. equal to the marginal cost
D. equal to the average fixed cost
answer
A. higher than the marginal cost
question
The quantity produced in a monopolistically competitive market is−−−−−−−−−than the quantity produced in a perfectly competitive market, and the price charged in a monopolistically competitive market is−−−−−−−−−than the price charged in a perfectly competitivemarket.
A. higher; higher
B. lower; higher
C. higher; lower
D. lower; lower
A. higher; higher
B. lower; higher
C. higher; lower
D. lower; lower
answer
B. lower; higher
question
The Herfindahl-Hirschman Index is used to−−−−−−−−−.
A. measure the price elasticity of demand faced by a firm
B. estimate the degree of competition in an industry
C. measure the price elasticity of market supply in an industry
D. estimate the profit earned by firms in an industry
A. measure the price elasticity of demand faced by a firm
B. estimate the degree of competition in an industry
C. measure the price elasticity of market supply in an industry
D. estimate the profit earned by firms in an industry
answer
B. estimate the degree of competition in an industry
question
The Herfindahl-Hirschman Index is calculated by−−−−−−−−−.
A. adding the market share of each firm in the market and squaring the resulting number
B. squaring the market share of each firm competing in the market and then summing the resulting numbers
C. adding the number of firms in the market and squaring the resulting number
D. adding the profit earned by each firm in the market
A. adding the market share of each firm in the market and squaring the resulting number
B. squaring the market share of each firm competing in the market and then summing the resulting numbers
C. adding the number of firms in the market and squaring the resulting number
D. adding the profit earned by each firm in the market
answer
B. squaring the market share of each firm competing in the market and then summing the resulting numbers
question
There are four firms in the cement industry in Richland. Firm A has a market shareof 30%, Firm B has a market share of 20%, Firm C has a market share of 25%, and FirmD has a market share of 25%. The Herfindahl-Hirschman Index for the cement industry is−−−−−−−−−.
A. 50
B. 100
C. 2,550
D. 4,000
A. 50
B. 100
C. 2,550
D. 4,000
answer
C. 2,550
question
There are a few ship manufacturers in Polonia and each firm faces a downward slopingdemand curve. The ship-building industry in Polonia is an example of a(n)−−−−−−−−−.
A. perfect competition
B. monopolistic competition
C. monopoly
D. oligopoly
A. perfect competition
B. monopolistic competition
C. monopoly
D. oligopoly
answer
D. oligopoly
question
Which of the following is a similarity between a monopoly and an oligopoly with differentiated products?
A. There are no barriers to entry in both markets
B. The long-run equilibrium price in both markets exceeds marginal cost
C. There is a single seller in both markets
D. Firms in both the markets earn zero profit in the long run
A. There are no barriers to entry in both markets
B. The long-run equilibrium price in both markets exceeds marginal cost
C. There is a single seller in both markets
D. Firms in both the markets earn zero profit in the long run
answer
B. The long-run equilibrium price in both markets exceeds marginal cost
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