question
In the long run, monopolistically competitive firms have:
answer
excess capacity.
question
What is the key feature shared by all oligopoly markets?
answer
Mutual interdependence.
question
How will the price and output of a monopolist compare with perfect competition?
answer
The output of the monopolist will be too small and the price too high.
question
As represented in Exhibit 10-3, the maximum long-run economic profit earned by this monopolistic competitive firm is:
answer
zero
question
When a perfectly competitive firm or a monopolistically competitive firm is making zero economic profit,
answer
no firms will want to enter or exit.
question
Which of the following statements best describes firms under monopolistic competition?
answer
In the long run, positive economic profit will be eliminated.
question
A major characteristic of the theory of oligopoly is that:
answer
the reactions of each firm depends on how the firm believes rivals will react.
question
Mutual interdependence applies to actions of:
answer
oligopolists.
question
Costume jewelry is produced in a monopolistically competitive market. One producer finds that MR = MC = $3 when output is 700 necklaces. An economist studying this information can conclude that:
answer
the producer charges a price greater than $3.
question
If all firms in a monopolistic competitive industry have demand and cost curves like those shown in Exhibit 10-2, we would expect that in the long run:
answer
firms in the industry earn zero economic profits.
question
The monopolistic competition market structure is characterized by a few large firms which account for a large percentage of industry sales.
answer
False
question
In the long run, the demand curve for the monopolistic competitive firm shown in Exhibit 10-1:
answer
shifts leftward.
question
In the long run, both monopolistic competition and perfect competition result in:
answer
zero economic profit for firms.
question
Suppose costs are identical for the two firms in Exhibit 10-5. Each firm assumes without formal agreement that if it sets the high price its rival will not charge a lower price. Under these "tit-for-tat" conditions, equilibrium will be established by:
answer
Beta Co. charging $1,000 and Alpha Co. charging $1,000.
question
Suppose an oil cartel has an agreement to restrict members' production in order to maintain a price of $30 per barrel. A single cartel member may want to cheat and exceed its quota so that it can:
answer
earn a bigger profit.
question
In a price leadership oligopoly model,
answer
one firm is the price leader and all other firms follow.
question
Which of the following is the best example of a firm operating in a monopolistically competitive market?
answer
TGI Fridays, a family restaurant.
question
Assume costs are identical for the two firms in Exhibit 10-7. If both firms were allowed to form a cartel and agree on their prices, equilibrium would be established by:
answer
Camel charging the high price and Marlboro charging the high price.
question
Which of the following is evidence of an ineffective cartel?
answer
All of these.
question
If a firm has substantial market power, it must be operating in an industry that would be classified as:
answer
a monopoly or oligopoly.
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