question
What is true with firms that engage in cooperative behavior instead of noncooperative behavior?
A) They produce more output.
B) they earn more profit.
C) They charge lower prices.
D) They act like perfect competitors.
A) They produce more output.
B) they earn more profit.
C) They charge lower prices.
D) They act like perfect competitors.
answer
B) They earn more profit.
question
The figure above shows a Payoff Matrix for two bottled water producers in Oregon. What behavior gives us the Nash equilibrium for this game?
A) Both firms charge a high price.
B) Both firms charge a low price.
C) Blue Spring charges a high price and Purple Rain charges a low price.
D) Purple Rain charges a high price and Blue Spring charges a low price.
A) Both firms charge a high price.
B) Both firms charge a low price.
C) Blue Spring charges a high price and Purple Rain charges a low price.
D) Purple Rain charges a high price and Blue Spring charges a low price.
answer
B) Both firms charge a low price.
question
The figure above shows a Payoff Matrix for two bottled water producers in Oregon. What is the equilibrium if both firms play a tit-for-tat strategy?
A) Both firms charge a high price.
B) Both firms charge a low price.
C) Blue Spring charges a high price and Purple Rain charges a low price.
D) Purple Rain charges a high price and Blue Spring charges a low price.
A) Both firms charge a high price.
B) Both firms charge a low price.
C) Blue Spring charges a high price and Purple Rain charges a low price.
D) Purple Rain charges a high price and Blue Spring charges a low price.
answer
A) Both firms charge a high price.
question
What is true with monopolistic competition?
A) Firms may advertise to increase demand for their product.
B) Entry of new firms shifts the demand curve for existing firms to the right.
C) When some firms exit, the demand curve for the firms that remain in the industry shifts to the left.
D) Firms earn large economic profits in the long run
A) Firms may advertise to increase demand for their product.
B) Entry of new firms shifts the demand curve for existing firms to the right.
C) When some firms exit, the demand curve for the firms that remain in the industry shifts to the left.
D) Firms earn large economic profits in the long run
answer
A) Firms may advertise to increase demand for their product.
question
Why does a monopolistically competitive firm have a downward-sloping demand curve?
A) It reflects product differentiation.
B) It eventually will become perfectly elastic as more firms enter.
C) It indicates collusion among firms in the industry.
D) It ensures that the firm will produce at minimum average cost in the long run
A) It reflects product differentiation.
B) It eventually will become perfectly elastic as more firms enter.
C) It indicates collusion among firms in the industry.
D) It ensures that the firm will produce at minimum average cost in the long run
answer
A) It reflects product differentiation.
question
What is the Nash equilibrium in the classic prisoners' dilemma?
A) Neither individual confesses.
B) Both individuals confess.
C) One confesses and the other does not.
D) Neither individual follows a dominant strategy.
A) Neither individual confesses.
B) Both individuals confess.
C) One confesses and the other does not.
D) Neither individual follows a dominant strategy.
answer
B) Both individuals confess.
question
What situation below is not true for monopolistic competition but is true for a monopoly?
A) The firm faces a downward-sloping demand curve.
B) The firm faces a downward-sloping marginal revenue curve.
C) The firm will earn positive economic profits in the long run.
D) The firm will produce at a point where price equals marginal cost.
A) The firm faces a downward-sloping demand curve.
B) The firm faces a downward-sloping marginal revenue curve.
C) The firm will earn positive economic profits in the long run.
D) The firm will produce at a point where price equals marginal cost.
answer
C) The firm will earn positive economic profits in the long run.
question
Why are cartels hard to maintain?
A) There is incentive for firms to raise prices.
B) There is incentive for firms to maximize industry profits.
C) There is incentive for firms to collude.
D) There is incentive for firms to cheat.
A) There is incentive for firms to raise prices.
B) There is incentive for firms to maximize industry profits.
C) There is incentive for firms to collude.
D) There is incentive for firms to cheat.
answer
A) There is incentive for firms to raise prices.
question
A monopolistically competitive firm should produce where ____________________ to maximize profits.
A) marginal revenue equals marginal cost
B) price equals marginal cost
C) price equals total cost
D) marginal revenue equals price
A) marginal revenue equals marginal cost
B) price equals marginal cost
C) price equals total cost
D) marginal revenue equals price
answer
A) marginal revenue equals marginal cost
question
A ______________________ is the outcome of a strategic choice.
A) Payoff
B) Game
C) Product
D) Dilemma
A) Payoff
B) Game
C) Product
D) Dilemma
answer
B) Game
question
In what situation below does a dominant strategy exist?
A) When a player has no choice.
B) When a player makes the same choice regardless of the action of the other players, and this occurs for all players.
C) When each player makes the best choice given the choice of the other player.
D) When no player is able to dictate the actions of any other player
A) When a player has no choice.
B) When a player makes the same choice regardless of the action of the other players, and this occurs for all players.
C) When each player makes the best choice given the choice of the other player.
D) When no player is able to dictate the actions of any other player
answer
D) When no player is able to dictate the actions of any other player
question
Which situation below is not true for monopolistic competition but is true for perfect competition?
A) The firm faces a downward-sloping demand curve.
B) The firm faces a downward-sloping marginal revenue curve.
C) The firm will earn zero economic profit in the long run.
D) The firm will produce at a point where price equals marginal cost.
A) The firm faces a downward-sloping demand curve.
B) The firm faces a downward-sloping marginal revenue curve.
C) The firm will earn zero economic profit in the long run.
D) The firm will produce at a point where price equals marginal cost.
answer
A) The firm faces a downward-sloping demand curve.
question
Pepsi and Coke have agreed to fix their prices at a certain level. What is this an example of?
A) Collusion
B) Satisfying demand
C) Price extortion
D) Price leadership
A) Collusion
B) Satisfying demand
C) Price extortion
D) Price leadership
answer
D) Price leadership
question
The marginal cost of purchasing additional resources
A) can remain constant and increase, but will not decrease.
B) can remain constant and decrease, but will not increase.
C) will always remain constant.
D) can remain constant, increase, or decrease.
A) can remain constant and increase, but will not decrease.
B) can remain constant and decrease, but will not increase.
C) will always remain constant.
D) can remain constant, increase, or decrease.
answer
B) can remain constant and decrease, but will not increase
question
Which of the following events would shift the marginal revenue product of Hannah's root beer factory workers to the left?
A) The price of root beer rises from $1.00 per bottle to $1.50 per bottle.
B) The wage of Hannah's workers rises from $10 an hour to $12 an hour.
C) Hannah invests in a new machine that makes her workers more productive.
D) The price of root beer falls from $1.00 per bottle to $0.75 per bottle.
A) The price of root beer rises from $1.00 per bottle to $1.50 per bottle.
B) The wage of Hannah's workers rises from $10 an hour to $12 an hour.
C) Hannah invests in a new machine that makes her workers more productive.
D) The price of root beer falls from $1.00 per bottle to $0.75 per bottle.
answer
D) The price of root beer falls from $1.00 per bottle to $0.75 per bottle.
question
How does a firm decide whether to hire an additional worker?
A) comparing the new worker's wage to existing workers' wages
B) comparing the cost of hiring the worker to the associated benefit
C) whether the worker will increase the total cost of production
D) whether the new worker will require training
A) comparing the new worker's wage to existing workers' wages
B) comparing the cost of hiring the worker to the associated benefit
C) whether the worker will increase the total cost of production
D) whether the new worker will require training
answer
B) comparing the cost of hiring the worker to the associated benefit
question
For firms renting capital in a perfectly competitive market, as the amount of capital utilized increases, the firm will experience
A) diminishing marginal productivity of capital.
B) increasing marginal productivity of capital.
C) an increased cost of renting capital.
D) a decreased cost of renting capital.
A) diminishing marginal productivity of capital.
B) increasing marginal productivity of capital.
C) an increased cost of renting capital.
D) a decreased cost of renting capital.
answer
A) diminishing marginal productivity of capital.
question
Which of the following scenarios would lead to an increase in the demand for mixers at Henry's bread bakery?
A) The productivity of mixers decreases.
B) The market price of bread increases.
C) The wage rate of labor (a substitute for capital) decreases.
D) The market price of mixers increases.
A) The productivity of mixers decreases.
B) The market price of bread increases.
C) The wage rate of labor (a substitute for capital) decreases.
D) The market price of mixers increases.
answer
B) The market price of bread increases.
question
A farmer who has fixed amounts of land and capital finds that total product is 24 for the first worker hired; 32 when two workers are hired; 37 when three are hired; and 40 when four are hired. The farmer's product sells for $3 per unit and the wage rate is $13 per worker. How many workers should the farmer hire?
A) 1
B) 2
C) 3
D) 4
A) 1
B) 2
C) 3
D) 4
answer
C) 3
question
The downward-sloping demand curve of a monopolistic competitor
A) reflects some level of control over its own price.
B) becomes eventually horizontal in the long run.
C) indicates collusion among the members of the product group.
D) ensures that the firm will produce at minimum average cost in the long run.
A) reflects some level of control over its own price.
B) becomes eventually horizontal in the long run.
C) indicates collusion among the members of the product group.
D) ensures that the firm will produce at minimum average cost in the long run.
answer
A) reflects some level of control over its own price.
question
A monopolistically competitive firm is producing at an output level in the short run where average total cost is $4.50, price is $4, marginal revenue is $2.50, and marginal cost is $2.50. This firm is operating
A) with positive profits.
B) with a loss.
C) at the break-even point.
D) at a nonoptimal level of output.
A) with positive profits.
B) with a loss.
C) at the break-even point.
D) at a nonoptimal level of output.
answer
B) with a loss.
question
Assume that a restaurant is hiring labor in an amount such that the MRC of the last worker is $16 and her MRP is $12. Based on this information, we can say that
A) profits will be increased by hiring additional workers.
B) profits will be increased by hiring fewer workers.
C) marginal revenue product must exceed average revenue product. D) the restaurant is maximizing profits.
A) profits will be increased by hiring additional workers.
B) profits will be increased by hiring fewer workers.
C) marginal revenue product must exceed average revenue product. D) the restaurant is maximizing profits.
answer
B) profits will be increased by hiring fewer workers.
question
Suppose the demand for strawberries rises sharply, resulting in an increased price for strawberries. As it relates to strawberry pickers, we could expect the
A) MRP curve to shift to the right.
B) MRP curve to shift to the left.
C) MRC curve to shift downward.
D) MP curve to shift downward.
A) MRP curve to shift to the right.
B) MRP curve to shift to the left.
C) MRC curve to shift downward.
D) MP curve to shift downward.
answer
A) MRP curve to shift to the right.
question
Use the graph below to answer the next question. Other things equal, an increase in the price of a complementary resource would cause a
A) move from a to b on D1.
B) shift from D2 to D3.
C) shift from D3 to D2.
D) move from b to a on D1.
A) move from a to b on D1.
B) shift from D2 to D3.
C) shift from D3 to D2.
D) move from b to a on D1.
answer
C) shift from D3 to D2.
question
If Firm A adopts the low-price strategy, then Firm B would adopt the
A) high-price strategy and earn $250.
B) high-price strategy and earn $200.
C) low-price strategy and earn $325.
D) low-price strategy and earn $175.
A) high-price strategy and earn $250.
B) high-price strategy and earn $200.
C) low-price strategy and earn $325.
D) low-price strategy and earn $175.
answer
D) low-price strategy and earn $175.
question
The long-run equilibrium for a monopolistically competitive firm is represented by
A) Graph A.
B) Graph B.
C) Graph C.
D) Graph D.
A) Graph A.
B) Graph B.
C) Graph C.
D) Graph D.
answer
B) Graph B.
question
A major distinction between a monopolistically competitive firm and an oligopolistic firm is that
A) one is a price taker and the other is a price maker.
B) a recognized interdependence exists between firms in one industry but not in the other.
C) one always produces differentiated products and the other always produces a homogeneous product.
D) one necessarily faces a downward-sloping demand curve and the other a horizontal demand curve.
A) one is a price taker and the other is a price maker.
B) a recognized interdependence exists between firms in one industry but not in the other.
C) one always produces differentiated products and the other always produces a homogeneous product.
D) one necessarily faces a downward-sloping demand curve and the other a horizontal demand curve.
answer
B) a recognized interdependence exists between firms in one industry but not in the other.
question
How many more workers will the firm hire when the wage rate is $15 instead of $30?
A) 1 worker
B) 2 workers
C) 3 workers
D) 4 workers
A) 1 worker
B) 2 workers
C) 3 workers
D) 4 workers
answer
B) 2 workers
question
If oligopolistic firms facing similar cost and demand conditions successfully collude, price and output results in this industry will be most accurately predicted by which of the following models?
A) the kinked demand curve model of oligopoly
B) the price-leadership model of oligopoly
C) the pure monopoly model
D) the monopolistic competition model
A) the kinked demand curve model of oligopoly
B) the price-leadership model of oligopoly
C) the pure monopoly model
D) the monopolistic competition model
answer
C) the pure monopoly model
question
If the product the firm produces sells for a constant $2 per unit, the marginal revenue product of the third unit of the resource is
A) $6.
B) $12.
C) $18.
D) $24.
A) $6.
B) $12.
C) $18.
D) $24.
answer
D) $24.
question
Which statement concerning monopolistic competition is false?
A) In the long run P = AC > MC.
B) Firms may experience losses in the short run.
C) Firms differentiate their products, but the products are relatively substitutable.
D) Firms may experience positive economic profits in the long run.
A) In the long run P = AC > MC.
B) Firms may experience losses in the short run.
C) Firms differentiate their products, but the products are relatively substitutable.
D) Firms may experience positive economic profits in the long run.
answer
D) Firms may experience positive economic profits in the long run.
question
Which cannot be a characteristic of an oligopolistic industry?
A) differentiated products
B) a large number of consumers
C) significant barriers to entry
D) a perfectly elastic firm demand curve
A) differentiated products
B) a large number of consumers
C) significant barriers to entry
D) a perfectly elastic firm demand curve
answer
D) a perfectly elastic firm demand curve
question
Demand and marginal revenue curves are downward-sloping for monopolistically competitive firms because
A) each firm must take the market price as given.
B) product differentiation allows each firm some degree of monopoly power.
C) there are a few large firms in the industry and they each act as a monopolist.
D) mutual interdependence among all firms in the industry leads to collusion.
A) each firm must take the market price as given.
B) product differentiation allows each firm some degree of monopoly power.
C) there are a few large firms in the industry and they each act as a monopolist.
D) mutual interdependence among all firms in the industry leads to collusion.
answer
B) product differentiation allows each firm some degree of monopoly power.
question
Which industry would be best characterized as monopolistically competitive?
A) smart-phone manufacturing
B) Internet-search sites
C) web design consulting
D) business cloud-computing services
A) smart-phone manufacturing
B) Internet-search sites
C) web design consulting
D) business cloud-computing services
answer
C) web design consulting
question
A unique feature of an oligopolistic industry is
A) low barriers to entry.
B) standardized products.
C) large number of producers.
D) mutual interdependence.
A) low barriers to entry.
B) standardized products.
C) large number of producers.
D) mutual interdependence.
answer
D) mutual interdependence.
question
Pepsi Co. and Coca Cola decide to merge. Which antitrust act is being violated?
A) the Sherman Act
B) the Federal Trade Commission Act
C) the Clayton Act
D) No antitrust law is being violated
A) the Sherman Act
B) the Federal Trade Commission Act
C) the Clayton Act
D) No antitrust law is being violated
answer
C) the Clayton Act
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
A) reduce product price.
B) increase the level of output.
C) decrease the level of output.
D) make no change in the level of output.
A) reduce product price.
B) increase the level of output.
C) decrease the level of output.
D) make no change in the level of output.
answer
D) make no change in the level of output.
question
Harry owns a barbershop and charges $13 per haircut. By hiring one barber at $11 per hour, the shop can provide 20 haircuts per eight-hour day. By hiring a second barber at the same wage rate, the shop can now provide a total of 38 haircuts per day. The MP of the second barber is
A) $234.
B) $494.
C) 18 haircuts.
D) 2 haircuts.
A) $234.
B) $494.
C) 18 haircuts.
D) 2 haircuts.
answer
C) 18 haircuts.
question
At the profit-maximizing level of output, marginal revenue is
A) $0.
B) $4.
C) $5.
D) $8.
A) $0.
B) $4.
C) $5.
D) $8.
answer
B) $4.
question
The consumer Wi-Fi-service providers' market is best described as a(n)
A) monopolistic competition.
B) monopoly.
C) oligopoly.
D) perfectly competitive market.
A) monopolistic competition.
B) monopoly.
C) oligopoly.
D) perfectly competitive market.
answer
C) oligopoly.
question
If the number of firms in a monopolistically competitive industry increases and the degree of product differentiation diminishes
A) the likelihood of realizing economic profits in the long run would be enhanced.
B) individual firms would now be operating at outputs where their average total costs would be higher.
C) the industry would more closely approximate pure competition. D) the likelihood of collusive pricing would increase.
A) the likelihood of realizing economic profits in the long run would be enhanced.
B) individual firms would now be operating at outputs where their average total costs would be higher.
C) the industry would more closely approximate pure competition. D) the likelihood of collusive pricing would increase.
answer
C) the industry would more closely approximate pure competition.
question
Apple and Samsung agree to stop undercutting each other's phone prices. Which antitrust act is being violated?
A) the Sherman Act
B) the Federal Trade Commission Act
C) the Clayton Act
D) No antitrust law is being violated.
A) the Sherman Act
B) the Federal Trade Commission Act
C) the Clayton Act
D) No antitrust law is being violated.
answer
A) the Sherman Act
question
A successful advertising campaign by the firm will cause its demand curve to shift from
A) A to B and become more elastic.
B) A to B and become less elastic.
C) B to A and become more elastic.
D) B to A and become less elastic.
A) A to B and become more elastic.
B) A to B and become less elastic.
C) B to A and become more elastic.
D) B to A and become less elastic.
answer
B) A to B and become less elastic.
question
If an industry has a Herfindahl Index of 10,000, then
A) it is considered an oligopoly.
B) the industry is a single firm.
C) it is perfectly competitive.
D) it is considered a duopoly
A) it is considered an oligopoly.
B) the industry is a single firm.
C) it is perfectly competitive.
D) it is considered a duopoly
answer
B) the industry is a single firm.
question
At long-run equilibrium in monopolistic competition, there is
A) allocative efficiency.
B) productive efficiency.
C) both allocative and productive efficiency.
D) neither allocative nor productive efficiency.
A) allocative efficiency.
B) productive efficiency.
C) both allocative and productive efficiency.
D) neither allocative nor productive efficiency.
answer
D) neither allocative nor productive efficiency.
question
An increase in which of the following factors does not increase the incentive to cheat within a cartel?
A) the number of firms in the cartel
B) economic performance and industry sales
C) the number of potential entrants into the industry
D) the cost differences among firms
A) the number of firms in the cartel
B) economic performance and industry sales
C) the number of potential entrants into the industry
D) the cost differences among firms
answer
B) economic performance and industry sales
question
If the four largest cell service providers sales make up 56 percent of total sales in the entire industry, then the industry is considered to be
A) monopolistically competitive.
B) an oligopoly.
C) perfectly competitive.
D) a monopoly.
A) monopolistically competitive.
B) an oligopoly.
C) perfectly competitive.
D) a monopoly.
answer
B) an oligopoly.
question
Collusion among oligopolistic firms
A) is common in world markets but does not happen in the United States.
B) becomes more difficult if there were fewer firms in the group.
C) becomes easier during a recession when sales are falling.
D) becomes more difficult if the firms all have different cost and demand curves
A) is common in world markets but does not happen in the United States.
B) becomes more difficult if there were fewer firms in the group.
C) becomes easier during a recession when sales are falling.
D) becomes more difficult if the firms all have different cost and demand curves
answer
D) becomes more difficult if the firms all have different cost and demand curves
question
Firms achieve the optimal resource utilization where
A) MR = MC
B) MR > MC
C) MRP > MRC
D) MRP = MRC
A) MR = MC
B) MR > MC
C) MRP > MRC
D) MRP = MRC
answer
D) MRP = MRC
question
Which of the following statements describes marginal resource cost?
A) It equals the change in total cost from an additional unit of output produced by an additional unit of resource employed.
B) It equals the change in total revenue from an additional unit of output produced by an additional unit of resource employed
C) It equals marginal product multiplied by price
D) It illustrates the demand curve for a resource
A) It equals the change in total cost from an additional unit of output produced by an additional unit of resource employed.
B) It equals the change in total revenue from an additional unit of output produced by an additional unit of resource employed
C) It equals marginal product multiplied by price
D) It illustrates the demand curve for a resource
answer
A) It equals the change in total cost from an additional unit of output produced by an additional unit of resource employed.
question
Which of the following scenarios will cause the demand curve for a resource to increase?
A) A decrease in productivity
B) An increase in the price of a complement
C) An increase in the price of a substitute
D) A decrease in the price of a substitute
A) A decrease in productivity
B) An increase in the price of a complement
C) An increase in the price of a substitute
D) A decrease in the price of a substitute
answer
C) An increase in the price of a substitute
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