HW9 - Assignment Essays

question

In which industry is monopolistic competition most likely to be found?

answer

retail trade

question

Which industry would be considered to be monopolistically competitive?

answer

breakfast cereals

question

Which market model is characterized by many firms, differentiated products, and relatively easy entry?

answer

monopolistic competition

question

Refer to the above graph of the representative firm in monopolistic competition. Demand is tangent to average total cost at point:

answer

question

In monopolistic competition there is an underallocation of resources at the profit-maximizing level of output, which means that:

answer

price is greater than MC

question

Assume that in a monopolistically competitive industry, firms are earning economic profit. This situation will:

answer

attract other firms to enter the industry since the barriers to entry are low

question

Refer to the above graph. It represents a monopolistically competitive firm in a constant-cost industry. The firm:

answer

is earning an economic profit at Q0

question

Refer to the above graphs. Which graph would not be a possible depiction of short-run or long-run outcomes for a monopolistically competitive firm?

answer

question

A monopolistically competitive firm is operating at a short-run level of output where price is $21, average total cost is $15, marginal cost is $13, and marginal revenue is $13. In the short run this firm should:

answer

make no change in the level of output

question

The U.S. primary steel industry is best described as a:

answer

homogeneous oligopoly

question

Which would be a qualification to the view that oligopoly is allocatively and productively inefficient?

answer

Oligopolies may purposely keep prices below short-run profit-maximizing levels to bolster barriers to entry.

question

The primary aluminum industry in the United States would be described by an economist as:

answer

oligopoly

question

What are the payoffs in the typical duopoly game?

answer

profits

question

Answer the next question based on the following payoff matrix for a duopoly. The numbers indicate the profit in thousands of dollars for a high-price or a low-price strategy

Refer to the above payoff matrix. Assume that firm Y adopts a low-price strategy while firm X maintains a high-price strategy. Compared to the results from a high-price strategy for both firms, firm Y will now

answer

gain $100,000 in profit and firm X will lose $150,000 in profit

question

An oligopolistic firm finds that marginal revenue can range from $10 to $25 at an output level of 2500 units. This information would suggest that the oligopolistic model for this industry is most likely one of:

answer

kinked demand

question

The principle underlying the kinked-demand curve model of oligopoly is that the demand curve facing one firm is more elastic when other firms in the industry:

answer

hold price constant when the firm changes its prices

question

Under oligopoly, a kinked-demand curve would explain why firms:

answer

avoid price wars

question

An oligopolistic price leader increases the price of its product. If all other firms follow the leader's example, the price leader will:

answer

maintain its new price

question

The Organization of Petroleum Exporting Countries (OPEC) behaves in many ways like 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 is to:

answer

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

question

The reason most cartels end or cease to be effective is (hint: cartels members face a prisoner's dilemma game):

answer

the incentive to cheat on the cartel agreement

question

This game results in which of the following outcomes?

answer

A nash equilibrium with both players choosing X

question

What is a positive effect of advertising?

answer

It provides the information that reduces search costs

1 of 22

question

In which industry is monopolistic competition most likely to be found?

answer

retail trade

question

Which industry would be considered to be monopolistically competitive?

answer

breakfast cereals

question

Which market model is characterized by many firms, differentiated products, and relatively easy entry?

answer

monopolistic competition

question

Refer to the above graph of the representative firm in monopolistic competition. Demand is tangent to average total cost at point:

answer

question

In monopolistic competition there is an underallocation of resources at the profit-maximizing level of output, which means that:

answer

price is greater than MC

question

Assume that in a monopolistically competitive industry, firms are earning economic profit. This situation will:

answer

attract other firms to enter the industry since the barriers to entry are low

question

Refer to the above graph. It represents a monopolistically competitive firm in a constant-cost industry. The firm:

answer

is earning an economic profit at Q0

question

Refer to the above graphs. Which graph would not be a possible depiction of short-run or long-run outcomes for a monopolistically competitive firm?

answer

question

answer

make no change in the level of output

question

The U.S. primary steel industry is best described as a:

answer

homogeneous oligopoly

question

Which would be a qualification to the view that oligopoly is allocatively and productively inefficient?

answer

Oligopolies may purposely keep prices below short-run profit-maximizing levels to bolster barriers to entry.

question

The primary aluminum industry in the United States would be described by an economist as:

answer

oligopoly

question

What are the payoffs in the typical duopoly game?

answer

profits

question

answer

gain $100,000 in profit and firm X will lose $150,000 in profit

question

answer

kinked demand

question

The principle underlying the kinked-demand curve model of oligopoly is that the demand curve facing one firm is more elastic when other firms in the industry:

answer

hold price constant when the firm changes its prices

question

Under oligopoly, a kinked-demand curve would explain why firms:

answer

avoid price wars

question

An oligopolistic price leader increases the price of its product. If all other firms follow the leader's example, the price leader will:

answer

maintain its new price

question

answer

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

question

The reason most cartels end or cease to be effective is (hint: cartels members face a prisoner's dilemma game):

answer

the incentive to cheat on the cartel agreement

question

This game results in which of the following outcomes?

answer

A nash equilibrium with both players choosing X

question

What is a positive effect of advertising?

answer

It provides the information that reduces search costs

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