Economics 2302 Chapters 10, 11, 12, 13, & 14

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The accompanying table gives cost data for a firm that is selling in a purely competitive market. If the market price for this firm's product is $15, it will produce

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0 units at a loss of $150.

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If a purely competitive firm is producing at the P = MC output and realizing an economic profit, at that output

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marginal revenue exceeds ATC.

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Refer to the accompanying graph. The firm will earn maximum total profits if it produces and sells quantity

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0C.

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If a purely competitive firm is maximizing economic profit,

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it may or may not be maximizing per-unit profit.

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In which of the following market structures is there clear-cut mutual interdependence with respect to price-output policies?

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oligopoly

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A firm reaches a break-even point (normal profit position) where

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total revenue and total cost are equal.

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The accompanying table gives cost data for a firm that is selling in a purely competitive market. The data are for

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the short run.

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Curve (3) in the diagram is a purely competitive firm's

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total revenue curve.

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In answering the question, assume a graph in which dollars are measured on the vertical axis and output on the horizontal axis.
For a purely competitive firm, total revenue graphs as a

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straight, upsloping line.

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Suppose that Joe sells pork in a purely competitive market. The market price of pork is $3 per pound. Joe's marginal revenue from selling the 12th pound of pork would be

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$3.

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In the standard model of pure competition in the short run, a profit-maximizing firm will produce the output quantity where the gap between

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total revenue and total cost is the largest, with revenue higher than cost.

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At P3 in the accompanying diagram, this firm will

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produce 40 units and incur a loss.

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A profit-maximizing firm in the short run will expand output

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as long as marginal revenue is greater than marginal cost.

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Which of the following is a feature of a purely competitive market?

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Products are standardized or homogeneous.

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The market for agricultural products such as wheat or corn would best be described by which market model?

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pure competition

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According to the accompanying diagram, at the profit-maximizing output, the firm will realize

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an economic profit of ABGH.

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The demand schedule or curve confronted by the individual, purely competitive firm is

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perfectly elastic.

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The accompanying table gives cost data for a firm that is selling in a purely competitive market. If product price is $75, the firm will produce

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4 units of output.

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According to the information in the provided diagram, this firm is selling its product in a(n)

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purely competitive market.

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Refer to the accompanying diagram. The firm will realize an economic profit if price is

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P4.

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The accompanying table gives cost data for a firm that is selling in a purely competitive market. At 3 units of output, total variable cost is ____ and total cost is ____.

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$60; $210

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This purely competitive firm shown in the accompanying graph will not produce unless price is at least

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$5.

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If a purely competitive firm is producing at some output level less than the profit-maximizing output, then

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marginal revenue exceeds marginal cost.

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In pure competition, each extra unit of output that a firm sells will yield a marginal revenue that is

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equal to the price.

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A firm finds that at its MR = MC output, its TC = $1,000, TVC = $800, TFC = $200, and total revenue is $900. This firm should

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produce because the resulting loss is less than its TFC.

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Suppose a firm in a purely competitive market discovers that the price of its product is above its minimum AVC point but everywhere below ATC. Given this, the firm

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should continue producing in the short run but leave the industry in the long run if the situation persists.

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Which of the following is true concerning purely competitive industries?

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In the short run, firms may incur economic losses or earn economic profits, but in the long run they earn normal profits.

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Suppose a purely competitive, increasing-cost industry is in long-run equilibrium. Now assume that a decrease in consumer demand occurs. After all resulting adjustments have been completed, the new equilibrium price

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and industry output will be less than the initial price and output.

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A constant-cost industry is one in which

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if 100 units can be produced for $100, then 150 can be produced for $150, 200 for $200, and so forth.

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Suppose an increase in product demand occurs in a decreasing-cost industry. As a result,

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the new long-run equilibrium price will be lower than the original long-run equilibrium price.

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If the long-run supply curve of a purely competitive industry slopes upward, this implies that the prices of relevant resources

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rise as the industry expands.

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Line (1) in the diagram reflects a situation where resource prices

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increase as industry output expands.

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The term productive efficiency refers to

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the production of a good at the lowest average total cost.

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If the price of bottled water is $2 and the marginal cost of producing it is $2.50,

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resources are being overallocated to bottled water.

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If the competitive firm depicted in this diagram produces output Q, it will

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earn a normal profit.

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Refer to the diagram. By producing at output level Q,

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both productive and allocative efficiency are achieved.

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In the diagram, at output level Q1,

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neither productive nor allocative efficiency is achieved.

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Which of the following would not be expected to occur in a purely competitive market in long-run equilibrium?

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Consumer and producer surplus will be minimized.

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(Consider This) The average life expectancy of a U.S. business is approximately

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10.2 years.

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(Last Word) Eliminating patents would tend to

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encourage innovation in products made up of many different technologies but discourage innovation of easy-to-copy products requiring large R&D costs to create.

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If the entry or exit of firms does not affect the resource prices in an industry, we refer to it as a

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constant-cost industry.

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Which of the following is not an assumption that we make in analyzing pure competition in the long run?

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Profits are not relevant to firm behavior anymore, because competitive firms earn zero profits in the long run.

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Refer to the accompanying graphs for a competitive market in the short run. Which of the following statements is true?

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The representative firm is experiencing economic losses.

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An industry where a change in the number of firms does not affect the prices of the resources used in the industry will have a long-run supply curve that is

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horizontal.

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Which statement is correct? The long-run supply curve for a purely competitive

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increasing-cost industry will be upward-sloping.

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The provided graph depicts long-run supply for

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an increasing-cost industry.

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The provided graph depicts a situation where, if the market demand for the product increases, the prices of the resources used by the firms in the industry would

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increase.

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Productive efficiency refers to

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cost minimization, where P = minimum ATC.

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The accompanying graph represents the purely competitive market for a product. When the market is at equilibrium, the producer surplus would be represented by the area

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Creative destruction is illustrated by which of the following pairs of products?

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digital cameras and film

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If the industry depicted in this graph operated as a pure monopoly, the output quantity would be

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90.

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Refer to the graph for a profit-maximizing monopolist. The firm will set its price equal to the distance:

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0J.

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Refer to the diagram. If this somehow was a costless product (that is, the total cost of any level of output was zero), the firm would maximize profits by

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producing Q2 units and charging a price of P2.

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A pure monopolist should never produce in the

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inelastic segment of its demand curve, because it can increase total revenue and reduce total cost by increasing price.

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Answer the question on the basis of the demand and cost data for a pure monopolist. The profit-maximizing price for the monopolist will be

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$2.25.

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The supply curve for a monopoly is

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not clearly defined.

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Answer the question on the basis of the accompanying demand schedule.
Price: $7, $6, $5, $4, $3
Quantity Demanded: 1, 2, 3, 4, 5

The marginal revenue obtained from selling the third unit of output is

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$3.

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Which is a major criticism of a monopoly as a source of allocative inefficiency?

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A monopolist fails to expand output to the level where the consumers' valuation of an additional unit is just equal to its opportunity cost.

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There is some evidence to suggest that X-inefficiency is

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more likely to occur in monopolistic firms than in competitive firms.

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Comparing a pure monopoly and a purely competitive firm with identical costs, we would find in long-run equilibrium that the pure monopolist's

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price and average total cost would be higher, but output would be lower.

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If the industry depicted in the graph comprises only one seller, the profit-maximizing price and quantity will be

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P3 and Q3.

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Assume that a monopolist faces a linear demand curve and that it produces the output quantity where total revenue is maximized. At that output, the price elasticity of demand for the product is

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equal to one.

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A pure monopolist is producing an output such that ATC = $4, P = $5, MC = $2, and MR = $3. This firm is realizing

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an economic profit that could be increased by producing more output.

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A price discriminating pure monopolist will attempt to charge each buyer (or group of buyers)

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the maximum price each would be willing to pay.

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If the industry depicted in this graph were a pure monopoly, the product price would be

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$16.

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A monopolist sells 6 units of a product per day at a unit price of $15. If it lowers the price to $14, its total revenue increases by $22. This implies that its sales quantity increases by

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2 units per day.

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Refer to the graphs of D and MR for a monopolist. Which of the following statements is true?

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Demand is elastic at a price of P1.

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With nonrivalrous consumption, such as in the case of online music and movies, as more consumers buy the product,

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the average cost of the output declines because the marginal cost is very small.

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In many large U.S. cities, taxicab companies operate as near monopolies because of

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licenses.

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A natural monopoly occurs when

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long-run average costs decline continuously through the range of demand.

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In the accompanying diagram, demand is relatively elastic

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in the P2P4 price range.

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Compared to the purely competitive industry, a pure monopoly

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is able to use barriers to entry and maintain positive economic profits in the long run.

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The practice of price discrimination is associated with pure monopoly because

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monopolists have considerable ability to control output and price.

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Many people believe that monopolies charge any price they want to without affecting sales. In fact, the output and sales level for a profit-maximizing monopoly is codetermined with price where

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marginal cost = marginal revenue.

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Consumers who clip and redeem discount coupons

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exhibit a higher price elasticity of demand for a given product than consumers who do not clip and redeem coupons.

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

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pure competition, monopolistic competition, oligopoly, pure monopoly

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Refer to the data. If Firm B merged with Firm C, the industry's four-firm concentration ratio would ____ and its Herfindahl index would ____.
Firm: A, B, C, D, E
Market Firm %: 40, 30, 20, 5, 5

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rise; rise

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Concentration ratios measure the

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percentage of total industry sales accounted for by the largest firms in the industry.

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A monopolistically competitive industry combines elements of both competition and monopoly. It is correct to say that the competitive element results from

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a relatively large number of firms, and the monopolistic element from product differentiation.

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Economic analysis of a monopolistically competitive industry is more complicated than that of pure competition because

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of product differentiation and consequent product promotion activities.

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The following are the respective numbers for the four-firm concentration ratio and Herfindahl index in an industry. Which set of numbers would suggest that the industry was monopolistically competitive?

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25 and 207

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Assume the top six firms comprising an industry have market shares of 10, 8, 8, 5, 5, and 4 percent. The remaining 20 firms each have market shares of 2 percent. The Herfindahl index for this industry is

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374.

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If an industry evolves from oligopoly to monopolistic competition, we would expect

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the four-firm concentration ratio to decrease.

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The goal of product differentiation and advertising in monopolistic competition is to make

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price less of a factor and product differences more of a factor in consumer purchases.

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Suppose the Herfindahl indexes for industries A, B, and C are 1,200, 5,000, and 7,500 respectively. These data imply that

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market power is greatest in industry C.

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Which of the following characteristics provide a monopolistically competitive firm some monopoly power?

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product differentiation

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A monopolistically competitive firm has a

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highly elastic demand curve.

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Which set of characteristics below best describes the basic features of monopolistic competition?

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easy entry, many firms, and differentiated products

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If you sum the squares of the market shares of each firm in an industry (as measured by percent of industry sales), you are calculating the

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Herfindahl index.

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A significant difference between a monopolistically competitive firm and a purely competitive firm is that the

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former sells similar, although not identical, products.

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Refer to the data. If all the firms in the industry merged into a single firm, the Herfindahl index would become
Firm: A, B, C, D, E, F
Market Share %: 20, 20, 20, 20, 10, 10

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10,000.

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Which of the following is not a basic characteristic of monopolistic competition?

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recognized mutual interdependence

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Which of the following is a measure of the degree of industry concentration?

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Herfindahl Index

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The restaurant, legal assistance, and clothing industries are each illustrations of

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monopolistic competition.

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The following pairs of products illustrate product differentiation, except

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tank tops and denim shorts.

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If the four-firm concentration ratio for industry X is 80,

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the four largest firms account for 80 percent of total sales.

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The Herfindahl index

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gives much greater weight to larger firms than to smaller firms in an industry.

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Industries X and Y both have four-firm concentration ratios of 32 percent, but the Herfindahl index for X is 256, while that for Y is 264. These data suggest

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greater market power in Y than in X.

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Monopolistic competition is characterized by a

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large number of firms and low entry barriers.

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Monopolistic competition resembles pure competition because

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barriers to entry are either weak or nonexistent.

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Economic efficiency can suffer as a result of advertising, when it

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increases brand loyalty, reducing buyers' elasticity of demand.

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Which of the following factors tends to foster the development of an oligopoly?

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economies of scale

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A high concentration ratio indicates that

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few firms produce most of the output in an industry.

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The product in an oligopolistic market

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may be homogeneous or differentiated.

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In an oligopolistic market, there is likely to be

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neither allocative nor productive efficiency.

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Collusive control over price may permit oligopolists to

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reduce uncertainty, increase profits, and possibly limit entry of new firms.

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Advertising can enhance economic efficiency when it

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expands sales such that firms achieve substantial economies of scale.

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Suppose the Herfindahl indexes for industries A, B, and C are 7,200, 5,000, and 1,500, respectively. These data imply

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that market power is greatest in industry A.

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The four-firm concentration ratio for the national industry does not capture the effects of all of the following, except

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market coverage of the four largest firms.

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The four-firm concentration ratio for an industry measures the

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extent to which the four largest firms dominate the sales of a good.

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In game theory, a "payoff matrix" is a table that shows the following, except

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the target payoffs that each firm or player is aiming for in their different strategies.

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A major reason that firms form a cartel is to

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maximize joint profits.

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The industry characterized by these data is?
Firm: A, B, C, D, E, F
Market Share %: 20, 20, 20, 20, 10, 10

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an oligopoly.

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Refer to the data. Suppose that enforcement of antitrust laws resulted in any firm in this industry with market share above 20 percent to be split into two firms, with each having equal market share. That would cause this industry to?
Firm: A, B, C, D, E
Market Share %: 40, 30, 20, 5, 5

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remain an oligopoly.

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Use your basic knowledge and your understanding of market structures to answer this question. Which of the following companies most closely approximates a homogeneous oligopolist in a highly concentrated industry?

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Pittsburgh Plate Glass

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An oligopolistic firm tends to have less control over its own pricing decisions than a firm in

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monopoly only.

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Refer to the game theory matrix, where the numerical data show the profits resulting from alternative combinations of advertising strategies for Ajax and Acme. Ajax's profits are shown in the upper right part of each cell; Acme's profits are shown in the lower left. Without collusion, the outcome of the game is cell

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The Herfindahl index for an industry is 2,550. Which of the following sets of market shares and industry with four firms would produce such an index?

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20, 25, 25, and 30

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The Organization of Petroleum Exporting Countries (OPEC) is an international cartel. If the cartel were to hire a consulting firm to monitor the production rates of member countries, the economic reason for this monitoring would be to

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detect those member countries that are depressing prices by producing more than their assigned quotas.

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The kinked-demand curve model of oligopoly is useful in explaining

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why oligopolistic prices might change infrequently.

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Which of the following is the best example of oligopoly?

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automobile manufacturing

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Which of the following best describes the efficiency results in oligopoly?

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P > MC and P > minimum ATC.

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Interindustry competition means that

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in some markets, the producers of a particular product might face competition from products produced by other industries.

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The consumer Wi-Fi-service providers' market is best described as a

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differentiated oligopoly.

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Advertising can enhance economic efficiency when it

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increases consumer awareness of substitute products.

1 of 125

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The accompanying table gives cost data for a firm that is selling in a purely competitive market. If the market price for this firm's product is $15, it will produce

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0 units at a loss of $150.

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If a purely competitive firm is producing at the P = MC output and realizing an economic profit, at that output

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marginal revenue exceeds ATC.

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Refer to the accompanying graph. The firm will earn maximum total profits if it produces and sells quantity

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0C.

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If a purely competitive firm is maximizing economic profit,

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it may or may not be maximizing per-unit profit.

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In which of the following market structures is there clear-cut mutual interdependence with respect to price-output policies?

answer

oligopoly

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A firm reaches a break-even point (normal profit position) where

answer

total revenue and total cost are equal.

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The accompanying table gives cost data for a firm that is selling in a purely competitive market. The data are for

answer

the short run.

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Curve (3) in the diagram is a purely competitive firm's

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total revenue curve.

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In answering the question, assume a graph in which dollars are measured on the vertical axis and output on the horizontal axis.
For a purely competitive firm, total revenue graphs as a

answer

straight, upsloping line.

question

Suppose that Joe sells pork in a purely competitive market. The market price of pork is $3 per pound. Joe's marginal revenue from selling the 12th pound of pork would be

answer

$3.

question

In the standard model of pure competition in the short run, a profit-maximizing firm will produce the output quantity where the gap between

answer

total revenue and total cost is the largest, with revenue higher than cost.

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At P3 in the accompanying diagram, this firm will

answer

produce 40 units and incur a loss.

question

A profit-maximizing firm in the short run will expand output

answer

as long as marginal revenue is greater than marginal cost.

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Which of the following is a feature of a purely competitive market?

answer

Products are standardized or homogeneous.

question

The market for agricultural products such as wheat or corn would best be described by which market model?

answer

pure competition

question

According to the accompanying diagram, at the profit-maximizing output, the firm will realize

answer

an economic profit of ABGH.

question

The demand schedule or curve confronted by the individual, purely competitive firm is

answer

perfectly elastic.

question

The accompanying table gives cost data for a firm that is selling in a purely competitive market. If product price is $75, the firm will produce

answer

4 units of output.

question

According to the information in the provided diagram, this firm is selling its product in a(n)

answer

purely competitive market.

question

Refer to the accompanying diagram. The firm will realize an economic profit if price is

answer

P4.

question

The accompanying table gives cost data for a firm that is selling in a purely competitive market. At 3 units of output, total variable cost is ____ and total cost is ____.

answer

$60; $210

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This purely competitive firm shown in the accompanying graph will not produce unless price is at least

answer

$5.

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If a purely competitive firm is producing at some output level less than the profit-maximizing output, then

answer

marginal revenue exceeds marginal cost.

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In pure competition, each extra unit of output that a firm sells will yield a marginal revenue that is

answer

equal to the price.

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A firm finds that at its MR = MC output, its TC = $1,000, TVC = $800, TFC = $200, and total revenue is $900. This firm should

answer

produce because the resulting loss is less than its TFC.

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Suppose a firm in a purely competitive market discovers that the price of its product is above its minimum AVC point but everywhere below ATC. Given this, the firm

answer

should continue producing in the short run but leave the industry in the long run if the situation persists.

question

Which of the following is true concerning purely competitive industries?

answer

In the short run, firms may incur economic losses or earn economic profits, but in the long run they earn normal profits.

question

answer

and industry output will be less than the initial price and output.

question

A constant-cost industry is one in which

answer

if 100 units can be produced for $100, then 150 can be produced for $150, 200 for $200, and so forth.

question

Suppose an increase in product demand occurs in a decreasing-cost industry. As a result,

answer

the new long-run equilibrium price will be lower than the original long-run equilibrium price.

question

If the long-run supply curve of a purely competitive industry slopes upward, this implies that the prices of relevant resources

answer

rise as the industry expands.

question

Line (1) in the diagram reflects a situation where resource prices

answer

increase as industry output expands.

question

The term productive efficiency refers to

answer

the production of a good at the lowest average total cost.

question

If the price of bottled water is $2 and the marginal cost of producing it is $2.50,

answer

resources are being overallocated to bottled water.

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If the competitive firm depicted in this diagram produces output Q, it will

answer

earn a normal profit.

question

Refer to the diagram. By producing at output level Q,

answer

both productive and allocative efficiency are achieved.

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In the diagram, at output level Q1,

answer

neither productive nor allocative efficiency is achieved.

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Which of the following would not be expected to occur in a purely competitive market in long-run equilibrium?

answer

Consumer and producer surplus will be minimized.

question

(Consider This) The average life expectancy of a U.S. business is approximately

answer

10.2 years.

question

(Last Word) Eliminating patents would tend to

answer

encourage innovation in products made up of many different technologies but discourage innovation of easy-to-copy products requiring large R&D costs to create.

question

If the entry or exit of firms does not affect the resource prices in an industry, we refer to it as a

answer

constant-cost industry.

question

Which of the following is not an assumption that we make in analyzing pure competition in the long run?

answer

Profits are not relevant to firm behavior anymore, because competitive firms earn zero profits in the long run.

question

Refer to the accompanying graphs for a competitive market in the short run. Which of the following statements is true?

answer

The representative firm is experiencing economic losses.

question

An industry where a change in the number of firms does not affect the prices of the resources used in the industry will have a long-run supply curve that is

answer

horizontal.

question

Which statement is correct? The long-run supply curve for a purely competitive

answer

increasing-cost industry will be upward-sloping.

question

The provided graph depicts long-run supply for

answer

an increasing-cost industry.

question

The provided graph depicts a situation where, if the market demand for the product increases, the prices of the resources used by the firms in the industry would

answer

increase.

question

Productive efficiency refers to

answer

cost minimization, where P = minimum ATC.

question

The accompanying graph represents the purely competitive market for a product. When the market is at equilibrium, the producer surplus would be represented by the area

answer

question

Creative destruction is illustrated by which of the following pairs of products?

answer

digital cameras and film

question

If the industry depicted in this graph operated as a pure monopoly, the output quantity would be

answer

90.

question

Refer to the graph for a profit-maximizing monopolist. The firm will set its price equal to the distance:

answer

0J.

question

Refer to the diagram. If this somehow was a costless product (that is, the total cost of any level of output was zero), the firm would maximize profits by

answer

producing Q2 units and charging a price of P2.

question

A pure monopolist should never produce in the

answer

inelastic segment of its demand curve, because it can increase total revenue and reduce total cost by increasing price.

question

Answer the question on the basis of the demand and cost data for a pure monopolist. The profit-maximizing price for the monopolist will be

answer

$2.25.

question

The supply curve for a monopoly is

answer

not clearly defined.

question

answer

$3.

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Which is a major criticism of a monopoly as a source of allocative inefficiency?

answer

A monopolist fails to expand output to the level where the consumers' valuation of an additional unit is just equal to its opportunity cost.

question

There is some evidence to suggest that X-inefficiency is

answer

more likely to occur in monopolistic firms than in competitive firms.

question

Comparing a pure monopoly and a purely competitive firm with identical costs, we would find in long-run equilibrium that the pure monopolist's

answer

price and average total cost would be higher, but output would be lower.

question

If the industry depicted in the graph comprises only one seller, the profit-maximizing price and quantity will be

answer

P3 and Q3.

question

Assume that a monopolist faces a linear demand curve and that it produces the output quantity where total revenue is maximized. At that output, the price elasticity of demand for the product is

answer

equal to one.

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A pure monopolist is producing an output such that ATC = $4, P = $5, MC = $2, and MR = $3. This firm is realizing

answer

an economic profit that could be increased by producing more output.

question

A price discriminating pure monopolist will attempt to charge each buyer (or group of buyers)

answer

the maximum price each would be willing to pay.

question

If the industry depicted in this graph were a pure monopoly, the product price would be

answer

$16.

question

A monopolist sells 6 units of a product per day at a unit price of $15. If it lowers the price to $14, its total revenue increases by $22. This implies that its sales quantity increases by

answer

2 units per day.

question

Refer to the graphs of D and MR for a monopolist. Which of the following statements is true?

answer

Demand is elastic at a price of P1.

question

With nonrivalrous consumption, such as in the case of online music and movies, as more consumers buy the product,

answer

the average cost of the output declines because the marginal cost is very small.

question

In many large U.S. cities, taxicab companies operate as near monopolies because of

answer

licenses.

question

A natural monopoly occurs when

answer

long-run average costs decline continuously through the range of demand.

question

In the accompanying diagram, demand is relatively elastic

answer

in the P2P4 price range.

question

Compared to the purely competitive industry, a pure monopoly

answer

is able to use barriers to entry and maintain positive economic profits in the long run.

question

The practice of price discrimination is associated with pure monopoly because

answer

monopolists have considerable ability to control output and price.

question

Many people believe that monopolies charge any price they want to without affecting sales. In fact, the output and sales level for a profit-maximizing monopoly is codetermined with price where

answer

marginal cost = marginal revenue.

question

Consumers who clip and redeem discount coupons

answer

exhibit a higher price elasticity of demand for a given product than consumers who do not clip and redeem coupons.

question

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

answer

pure competition, monopolistic competition, oligopoly, pure monopoly

question

Refer to the data. If Firm B merged with Firm C, the industry's four-firm concentration ratio would ____ and its Herfindahl index would ____.
Firm: A, B, C, D, E
Market Firm %: 40, 30, 20, 5, 5

answer

rise; rise

question

Concentration ratios measure the

answer

percentage of total industry sales accounted for by the largest firms in the industry.

question

A monopolistically competitive industry combines elements of both competition and monopoly. It is correct to say that the competitive element results from

answer

a relatively large number of firms, and the monopolistic element from product differentiation.

question

Economic analysis of a monopolistically competitive industry is more complicated than that of pure competition because

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of product differentiation and consequent product promotion activities.

question

answer

25 and 207

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answer

374.

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If an industry evolves from oligopoly to monopolistic competition, we would expect

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the four-firm concentration ratio to decrease.

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The goal of product differentiation and advertising in monopolistic competition is to make

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price less of a factor and product differences more of a factor in consumer purchases.

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Suppose the Herfindahl indexes for industries A, B, and C are 1,200, 5,000, and 7,500 respectively. These data imply that

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market power is greatest in industry C.

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Which of the following characteristics provide a monopolistically competitive firm some monopoly power?

answer

product differentiation

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A monopolistically competitive firm has a

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highly elastic demand curve.

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Which set of characteristics below best describes the basic features of monopolistic competition?

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easy entry, many firms, and differentiated products

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If you sum the squares of the market shares of each firm in an industry (as measured by percent of industry sales), you are calculating the

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Herfindahl index.

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A significant difference between a monopolistically competitive firm and a purely competitive firm is that the

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former sells similar, although not identical, products.

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Refer to the data. If all the firms in the industry merged into a single firm, the Herfindahl index would become
Firm: A, B, C, D, E, F
Market Share %: 20, 20, 20, 20, 10, 10

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10,000.

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Which of the following is not a basic characteristic of monopolistic competition?

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recognized mutual interdependence

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Which of the following is a measure of the degree of industry concentration?

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Herfindahl Index

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The restaurant, legal assistance, and clothing industries are each illustrations of

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monopolistic competition.

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The following pairs of products illustrate product differentiation, except

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tank tops and denim shorts.

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If the four-firm concentration ratio for industry X is 80,

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the four largest firms account for 80 percent of total sales.

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The Herfindahl index

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gives much greater weight to larger firms than to smaller firms in an industry.

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Industries X and Y both have four-firm concentration ratios of 32 percent, but the Herfindahl index for X is 256, while that for Y is 264. These data suggest

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greater market power in Y than in X.

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Monopolistic competition is characterized by a

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large number of firms and low entry barriers.

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Monopolistic competition resembles pure competition because

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barriers to entry are either weak or nonexistent.

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Economic efficiency can suffer as a result of advertising, when it

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increases brand loyalty, reducing buyers' elasticity of demand.

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Which of the following factors tends to foster the development of an oligopoly?

answer

economies of scale

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A high concentration ratio indicates that

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few firms produce most of the output in an industry.

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The product in an oligopolistic market

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may be homogeneous or differentiated.

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In an oligopolistic market, there is likely to be

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neither allocative nor productive efficiency.

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Collusive control over price may permit oligopolists to

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reduce uncertainty, increase profits, and possibly limit entry of new firms.

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Advertising can enhance economic efficiency when it

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expands sales such that firms achieve substantial economies of scale.

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Suppose the Herfindahl indexes for industries A, B, and C are 7,200, 5,000, and 1,500, respectively. These data imply

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that market power is greatest in industry A.

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The four-firm concentration ratio for the national industry does not capture the effects of all of the following, except

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market coverage of the four largest firms.

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The four-firm concentration ratio for an industry measures the

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extent to which the four largest firms dominate the sales of a good.

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In game theory, a "payoff matrix" is a table that shows the following, except

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the target payoffs that each firm or player is aiming for in their different strategies.

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A major reason that firms form a cartel is to

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maximize joint profits.

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The industry characterized by these data is?
Firm: A, B, C, D, E, F
Market Share %: 20, 20, 20, 20, 10, 10

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an oligopoly.

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remain an oligopoly.

question

answer

Pittsburgh Plate Glass

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An oligopolistic firm tends to have less control over its own pricing decisions than a firm in

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monopoly only.

question

answer

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The Herfindahl index for an industry is 2,550. Which of the following sets of market shares and industry with four firms would produce such an index?

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20, 25, 25, and 30

question

answer

detect those member countries that are depressing prices by producing more than their assigned quotas.

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The kinked-demand curve model of oligopoly is useful in explaining

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why oligopolistic prices might change infrequently.

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Which of the following is the best example of oligopoly?

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automobile manufacturing

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Which of the following best describes the efficiency results in oligopoly?

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P > MC and P > minimum ATC.

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Interindustry competition means that

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in some markets, the producers of a particular product might face competition from products produced by other industries.

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The consumer Wi-Fi-service providers' market is best described as a

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differentiated oligopoly.

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Advertising can enhance economic efficiency when it

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increases consumer awareness of substitute products.

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