question
T/F? In the prisoner's dilemma, each prisoner would be better off if neither one confesses.
answer
True
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In a monopolistic competitive industry
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each firm in the industry produces a slightly differentiated product.
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The monopolistic competitive firm faces a __________ demand curve and therefore is a price __________.
answer
downward-sloping; searcher
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Compared to a monopolistic competitor, a monopolist produces a good with __________ substitutes and so has a __________ elastic demand curve.
answer
fewer; less
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A cartel is an organization of firms
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that reduces output and increases price in an effort to increase joint profits.
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If the firms of an industry form a cartel, their goal is to
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cut back on output and raise the price of their product to earn higher profits.
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The "prisoner's dilemma" game illustrates a case in which
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individually rational behavior leads to a collectively inefficient outcome.
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The theory of oligopoly assumes
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a few sellers and many buyers. AND significant barriers to entry
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Which of the following is not an assumption of oligopoly?
answer
There are few buyers.
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If two firms that form a cartel agreement are in a prisoner's dilemma game, then
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both firms will have an incentive to break the agreement. AND both firms will be better off if they hold to the agreement than if they break it.
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A monopolist is a _______________ and a monopolistic competitor is ______________________.
answer
price searcher; also a price searcher
question
Total industry sales are $130 million. The top four firms (A, B, C, and D) account for sales of $38 million, $21 million, $13 million and $8 million, respectively. What is the approximate four-firm concentration ratio?
answer
0.62
question
The monopolistic competitive firm faces a(n) __________ demand curve.
answer
downward-sloping
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The profit-maximizing perfectly competitive firm charges a price equal to __________ while the profit-maximizing monopolistic competitive firm charges a price __________.
answer
marginal cost; greater than marginal cost AND marginal revenue; greater than marginal revenue
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A firm in a monopolistic competitive market will produce a level of output at which
answer
P > MR.
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There are few sellers and many buyers in the
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oligopoly market structure
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The concentration ratio provides a measure of the extent to which an industry
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is dominated by a small number of firms.
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A monopolist is a _______________ and a monopolistic competitor is ______________________.
answer
price searcher; also a price searcher
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A significant difference between perfect competition and monopolistic competition is that
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a perfectly competitive firm sells a homogeneous product, while a monopolistic competitive firm sells a differentiated product
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If the four-firm concentration ratio is 0.55, and the top four firms account for $25 million in sales, it follows that total industry sales equal
answer
$45.45 million.
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The profit-maximizing perfectly competitive firm charges a price equal to __________ while the profit-maximizing monopolistic competitive firm charges a price __________.
answer
marginal cost; greater than marginal cost AND marginal revenue; greater than marginal revenue
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The profit-maximizing monopolistic competitive firm produces the level of output at which
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marginal revenue equals marginal cost.
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Does the monopolistic competitive firm exhibit resource-allocative efficiency?
answer
No, because at its chosen quantity of output, price is greater than marginal cost.
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Monopolistic competitive firms and perfectly competitive firms are similar in that both
answer
face no barriers to entry or exit.
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In an oligopoly market, unlike in other market structures, firms
answer
can act interdependently AND can produce a homogeneous
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For a monopoly firm, price is __________ marginal revenue, and for a monopolistic competitive firm, price is __________ marginal revenue
answer
greater than; greater than
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The profit-maximizing monopolistic competitor produces at the level of output where
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marginal cost equals marginal revenue, but not price.
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The monopolistic competitor is a price
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searcher, because of product differentiation
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In the prisoner's dilemma, both prisoners end up __________, which turns out to be __________ confessed.
answer
confessing; worse for them than if they had both not
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In the prisoner's dilemma, each prisoner would be best off if
answer
neither confesses.
question
The monopolistic competitive firm faces a __________ demand curve and therefore is a price __________.
answer
downward-sloping; searcher
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T /F: The profit-maximizing monopolistic competitive firm produces a level of output at which marginal revenue equals marginal cost.
answer
True
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