question
positive
answer
If the cross elasticity of demand between two products is ________________, the goods are substitutes.
question
Homogeneous product
answer
Which of the following is not a characteristic of monopolistic competition?
Homogeneous product
Large number of sellers
Easy entry and exit
Large number of close substitutes
Homogeneous product
Large number of sellers
Easy entry and exit
Large number of close substitutes
question
True
One of the characteristics of monopolistic competition is that the demand curve, though downward sloping, is very elastic.
One of the characteristics of monopolistic competition is that the demand curve, though downward sloping, is very elastic.
answer
True or false. One of the characteristics of monopolistic competition is that it has a relatively elastic demand curve.
question
Retail firms often fit the model of monopolistic competition, as they offer differentiated products, there are a large number of sellers, and entry and exit is easy.
answer
In which of the following market structures do retail outlets operate?
Monopolistic competition
Perfect competition
Monopoly
Oligopsony
Monopolistic competition
Perfect competition
Monopoly
Oligopsony
question
False - Competition through the use of advertising, style changes, color changes, and other techniques is referred to as nonprice competition.
answer
True or false. The competition that exists with rival firms through the use of advertising, style changes, color changes, and other techniques is referred to as price competition.
question
profit
answer
A monopolistically competitive firm chooses a level of output where MR = MC because that level of output maximizes ___________ of the firm.
question
cuts
expands
maximized
expands
maximized
answer
If MC > MR, then a firm _____ it production, and if
MR > MC, a firm ________ its production.
At a point where MR = MC, profit is __________ for a monopolistically competitive firm.
MR > MC, a firm ________ its production.
At a point where MR = MC, profit is __________ for a monopolistically competitive firm.
question
True - A downward sloping demand curve means a firm can change its output in order to change its price. Monopolistically competitive firms sell differentiated products, so they face downward sloping demand curves.
answer
True or false. In the short run, monopolistically competitive firms face a downward sloping demand curve.
question
making a profit
answer
If the demand curve is higher than the AC curve of the firm is the firm making or losing a profit?
question
False - A monopolistically competitive firm cannot earn positive or negative economic profit in the long run, because its AC equals its price at the profit maximizing level of output.
answer
True or false. A firm in a monopolistic competition market can earn positive or negative economic profit in the long run.
question
True
answer
True or false. In the long run, monopolistically competitive firms produce at a point where demand equals average cost.
question
Oligopoly
answer
_____________ is the market structure in which there are only a few firms or a few firms dominate the market
question
pure
answer
An oligopolistic industry that produces a homogeneous product is referred to as a ________ oligopoly
question
differentiated
answer
________________ oligopoly produces products that are different. The auto industry is a good example and there are price clusters.
question
True - John Kenneth Galbraith did argue that oligopolists coordinate decisions and share markets to act as a monopoly.
answer
True or false. Galbraith's shared monopoly model of oligopoly argues that oligopolists coordinate decisions and share markets to act as a monopoly.
question
True
answer
True or false. Oligopolies can produce either homogeneous or differentiated goods.
question
they are mutually interdependent.
That means that firms must pay close attention to what other firms in the industry do and they must react to those behaviors.
That means that firms must pay close attention to what other firms in the industry do and they must react to those behaviors.
answer
In an oligopoly, firms realize
they are mutually interdependent.
they do not have to compete.
they have identical cost structures.
they are independent.
they are mutually interdependent.
they do not have to compete.
they have identical cost structures.
they are independent.
question
A small number of buyers
answer
Which of the following is not a factor that determines coordination by oligopolies?
Size of firms
Barriers to entry
Antitrust activity
A small number of buyers
Size of firms
Barriers to entry
Antitrust activity
A small number of buyers
question
the distribution of economic power in an industry.
answer
The concentration ratio is a measure useful in determining
the degree of price discrimination in an industry.
the distribution of economic power in an industry.
the degree of product differentiation in an industry.
the profitability of an industry.
the degree of price discrimination in an industry.
the distribution of economic power in an industry.
the degree of product differentiation in an industry.
the profitability of an industry.
question
False - The four-firm concentration ratio is a measure of the percentage of total SALES accounted for by the four largest firms in an industry.
answer
True or false. The four-firm concentration ratio measures the percentage of assets owned by the four largest firms in an industry.
question
Herfindahl
answer
The _________________ Index is the sum of the squares of market shares in an industry. The formula for this sum is
H=(S1)2+(S2)2+...+(Sn)2,
H=(S1)2+(S2)2+...+(Sn)2,
question
3450
(50)2+(25)2+(15)2+(10)2=3450
(50)2+(25)2+(15)2+(10)2=3450
answer
If an industry has four firms (A, B, C, D), and their market share is 50%, 25%, 15%, 10%, respectively, the Herfindahl index is
question
sum the squares of market shares in an industry.
answer
In order to calculate the Herfindahl index, one must
sum the market shares of all firms in an industry.
sum the squares of market shares of the top four firms in an industry.
sum the squares of market shares in an industry.
sum the market share of the top four firms in an industry.
sum the market shares of all firms in an industry.
sum the squares of market shares of the top four firms in an industry.
sum the squares of market shares in an industry.
sum the market share of the top four firms in an industry.
question
2.9
The number equivalent is 2.9. (1/3450) x 10,000 = 2.9.
The number equivalent is 2.9. (1/3450) x 10,000 = 2.9.
answer
If an industry has four firms (A, B, C, and D), and their market share is 50%, 25%, 15%, 10%, respectively, the number equivalent is
question
oligopolies and monopolies
answer
When looking at the various market structures, there are only two market structures that are able to earn economic profits in the long-run. Those market structures are ____________ and _____________, which are able to earn economic profits given the relatively high barriers to entry and exit.
question
nonprice competition.
These product differentiation features that affect consumer perception without changing the price are known as nonprice competition.
These product differentiation features that affect consumer perception without changing the price are known as nonprice competition.
answer
When monopolistic competitors differentiate their products through branding, marketing, advertising, and design, they are working with elements of
price discrimination.
perfect competition.
product discrimination.
nonprice competition.
price discrimination.
perfect competition.
product discrimination.
nonprice competition.
question
zero profits.
answer
Over the long run, monopolistic competitors make
positive economic profit.
zero profits.
more than the best perfect competitors.
negative economic profit.
positive economic profit.
zero profits.
more than the best perfect competitors.
negative economic profit.
question
In both cases, there are many firms.
answer
Monopolistic competition is similar to perfect competition in that
there is no nonprice competition.
products are homogeneous.
there are many firms.
there is no control over price.
there is no nonprice competition.
products are homogeneous.
there are many firms.
there is no control over price.
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