PCE 9 - Assignment Essays

question

two types of market models that closely approximate many markets in the real world are

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monopolistic competition and oligopoly

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a(n) _oligopoly_ is a market dominated by a few large producers of a homogeneous or differentiated product

answer

oligopoly

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when plant and equipment are underutilized because firms are producing less than the minimum- ATC output, this is known as having _productive inefficiency_ _excess capacity_.

answer

productive inefficiency

excess capacity

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which of the following is a characteristic of monopolistic competition?

answer

differentiated products

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if a monopolistically competitive firm is producing where its marginal revenue is less than its marginal cost, then the firm

answer

should produce less output to increase profits or reduce losses

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the equality or price and minimum average total cost yields technical _productive_ efficiency; the equality of price and marginal cost yields _allocative_ efficiency

answer

productive, allocative

question

monopolistic competition normally consist of 25 to 75 firms rather than hundreds or thousands and involves which of the following characteristics?

answer

no collusion

small market shares

independent action

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the demand curve for a monopolistically competitive firm is

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downward-sloping

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firms in oligopolistic industries are " price makers" because

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they are few in number

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entry of new firms into monopolistically competitive industries is relatively easy because

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capital requirements are low

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_monopolistic_ competition is a market characterized by having many sellers, differentiated products, and with ease of entry and eat from an industry

answer

monopolistic

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to achieve economic efficiency that reduces the number of resources used but increases the number of socially optimal outputs requires a triple equality. the three components that must be equal are which of the following?

answer

marginal cost, price, minimum average total cost

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non-price competition is competition illustrated through product differentiation and advertising.

answer

price

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oligopolies are comprised of

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a few large producers

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firms in monopolistic competition produce goods with:

answer

varying degrees of customer service

slightly varying physical characteristics

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in the long run, if a monopolistically competitive firm is earning normal profits (breaking even), then it should

answer

not exit the industry because both explicit and implicit costs are covered

question

firms often merge, forming oligopolies in order to

answer

increase control over price

become a larger buyer of inputs

gain greater control over market supply

question

the ability of monopolistically competitive firms to engage in _____ competition makes the market situation more complex because of differentiated product differences and advertising

answer

nonprice

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managers can identify excess capacity by measuring the gap between

answer

the minimum average total cost output and the profit-maximizing output

question

in the figure, why doesn't the monopolistically competitive firm achieve allocative efficiency?

answer

it does not achieve allocative efficiency because it produces where price exceeds

question

in monopolistically competitive industries, small store with high prices can compete with larger store by

answer

having very convenient locations for customers

question

monopolistically competitive firms do not achieve allocative efficiency because __.

answer

price for a monopolistically competitive firm exceeds the marginal cost

question

in order for a monopolistically competitive firm to maximize profits, it must juggle which of the following factors?

answer

the selling price of the product

the variety of the product

the level of advertising

question

a monopolistic competitive firm's demand curve is

answer

downward-sloping like the demand curve for a monopoly, not horizontal like those in purely competitive markets

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barriers to entry into an oligopoly most resemble those of a:

answer

pure monopoly

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productive efficiency in monopolistically competitive markets does not occur in the long run because firms set the price

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on the demand curve where MR=MC to maximize economic profit, making output less than optimal from society's perspective

question

which of the following is not an example of product differentiation?

answer

some stores may charge different prices

question

allocative efficiency is achieved in the short run when the equality of which of the following occurs?

answer

P=MC

question

when Mary tried to get an appointment with a local dentist she was told that the earliest the doctor could see her was in three weeks. this may have been due to a lack of

answer

excess capacity

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true or false: firms in an oligopoly always produce a homogeneous product

answer

false

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compared with oligopoly and monopoly, entry of new firms into monopolistically competitive industries is

answer

relatively easy because economies of scale are few

question

a monopolistically competitive firm's demand curve is

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highly but not perfectly elastic
(it is elastic because the monopolistically competitive seller has many competitors producing closely substitutable goods, the latter being a determinant of the elasticity of demand

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the monopolistically competitive firms economic profit per unit when producing at Q1 units of output

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the difference between P1 and A1

(recall that profit can be calculated as price minus average total cost (ATC) multiplied by output. Here P1 represents price and A1 represents ATC at Q1 units of output)

question

which of the following contributed to making the American auto industry into a differentiated oligopoly for nearly a century?

answer

entry barriers into the auto manufacturing industry

the strategic behavior of competitors

mergers to help gain economies scale

the metal interdependent of each firm's profitability

question

oligopolies must consider the possible reaction of rivals to its own __,__ and __ decisions.

answer

pricing, output, advertising

question

all of the following are examples of oligopolies that produce a differentiated product except

answer

copper

question

in monopolistically competitive industries

answer

collusion is unlikely because there is a large number of firms

question

one of the largest barriers to entry into the refining industry is

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the capital equipment investment

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all of the following are reasons why firms might merge, except:

answer

to decrease monopoly power

question

in the figure, excess capacity

answer

is the gap between Q3 and Q4

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the elasticities of the demand curves for firms in monopolistically competitive (MC) industries will become more like that firms in pure competition as

answer

the number of rival increase and produce differentiation grows weaker

(in pure competition, demand is perfectly elastic as exhibited by a horizontal demand curve because there are many rivals each producing an identical, substitutable product. In an MC industry, firms can prevent highly elastic demanded by continuing to differentiate their products.)

question

monopolistically competitive firms advertise in order to

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make consumers demand curve more elastic

question

In monopolistically competitive industries

answer

firms feel independent of one another, allowing them to determine their own price without considering the possible reactions by rival firms

question

a situation in which each firm's profit depends not entirely on its own price and sales strategies but also on those of other firms is known as __.

answer

mutual interdependence

(note the key word "depends" in the question)

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an example of an oligopoly that produces a standardized product is the market for

answer

cement

question

in the figure, why is allocative efficiency not achieved?

answer

at Q3, price exceeds MC to maximize profits and under-allocates resources

(in order to achieve allocative efficiency, a firm must produce at a price that is equal to the marginal cost (MC) of production. In the figure, the firm produces at Q3 and charges a price all the way up to the demand curve at P3.)

question

in the figure, does the monopolistically competitive firm achieve productive efficiency?

answer

it does not achieve productive efficiency because it does not produce at eh lowest average total cost.

question

monopolistically competitive firms typically have a relatively _small_ share of the market and consequently _limited_ control over market price

answer

small; limited

question

a major trade-off that occurs in monopolistically competitive industries as product differentiation increases is

answer

excess capacity increases

question

which of the following turns out variations of a particular product?

answer

monopolistically competitive firms

question

true or false: strategic behavior takes into account the reactions of others

answer

true

question

a monopolistically competitive firm may be able to continue earning profit in the long run

answer

through further product differentiation

(the stronger the product differentiation (variety), the greater the excess capacity)

question

which of the following represents the most significant benefits to society generated by monopolistically competitive markets?

answer

product differentiation

question

when firms differentiate their products so that consumers are willing to pay more, firms do not _maximize_ output capacity and do not produce at the _lowest average_ total cost.

answer

maximize; lowest average

question

what should B-Balls do in regard to output for their basketballs to help minimize losses until some firms exit the industry?

answer

they should reduce output to wherever their new MR curve equals the MC curve caused by a shift in demand leftward

1 of 55

question

two types of market models that closely approximate many markets in the real world are

answer

monopolistic competition and oligopoly

question

a(n) _oligopoly_ is a market dominated by a few large producers of a homogeneous or differentiated product

answer

oligopoly

question

when plant and equipment are underutilized because firms are producing less than the minimum- ATC output, this is known as having _productive inefficiency_ _excess capacity_.

answer

productive inefficiency

excess capacity

question

which of the following is a characteristic of monopolistic competition?

answer

differentiated products

question

if a monopolistically competitive firm is producing where its marginal revenue is less than its marginal cost, then the firm

answer

should produce less output to increase profits or reduce losses

question

the equality or price and minimum average total cost yields technical _productive_ efficiency; the equality of price and marginal cost yields _allocative_ efficiency

answer

productive, allocative

question

monopolistic competition normally consist of 25 to 75 firms rather than hundreds or thousands and involves which of the following characteristics?

answer

no collusion

small market shares

independent action

question

the demand curve for a monopolistically competitive firm is

answer

downward-sloping

question

firms in oligopolistic industries are " price makers" because

answer

they are few in number

question

entry of new firms into monopolistically competitive industries is relatively easy because

answer

capital requirements are low

question

_monopolistic_ competition is a market characterized by having many sellers, differentiated products, and with ease of entry and eat from an industry

answer

monopolistic

question

answer

marginal cost, price, minimum average total cost

question

non-price competition is competition illustrated through product differentiation and advertising.

answer

price

question

oligopolies are comprised of

answer

a few large producers

question

firms in monopolistic competition produce goods with:

answer

varying degrees of customer service

slightly varying physical characteristics

question

in the long run, if a monopolistically competitive firm is earning normal profits (breaking even), then it should

answer

not exit the industry because both explicit and implicit costs are covered

question

firms often merge, forming oligopolies in order to

answer

increase control over price

become a larger buyer of inputs

gain greater control over market supply

question

the ability of monopolistically competitive firms to engage in _____ competition makes the market situation more complex because of differentiated product differences and advertising

answer

nonprice

question

managers can identify excess capacity by measuring the gap between

answer

the minimum average total cost output and the profit-maximizing output

question

in the figure, why doesn't the monopolistically competitive firm achieve allocative efficiency?

answer

it does not achieve allocative efficiency because it produces where price exceeds

question

in monopolistically competitive industries, small store with high prices can compete with larger store by

answer

having very convenient locations for customers

question

monopolistically competitive firms do not achieve allocative efficiency because __.

answer

price for a monopolistically competitive firm exceeds the marginal cost

question

in order for a monopolistically competitive firm to maximize profits, it must juggle which of the following factors?

answer

the selling price of the product

the variety of the product

the level of advertising

question

a monopolistic competitive firm's demand curve is

answer

downward-sloping like the demand curve for a monopoly, not horizontal like those in purely competitive markets

question

barriers to entry into an oligopoly most resemble those of a:

answer

pure monopoly

question

productive efficiency in monopolistically competitive markets does not occur in the long run because firms set the price

answer

on the demand curve where MR=MC to maximize economic profit, making output less than optimal from society's perspective

question

which of the following is not an example of product differentiation?

answer

some stores may charge different prices

question

allocative efficiency is achieved in the short run when the equality of which of the following occurs?

answer

P=MC

question

when Mary tried to get an appointment with a local dentist she was told that the earliest the doctor could see her was in three weeks. this may have been due to a lack of

answer

excess capacity

question

true or false: firms in an oligopoly always produce a homogeneous product

answer

false

question

compared with oligopoly and monopoly, entry of new firms into monopolistically competitive industries is

answer

relatively easy because economies of scale are few

question

a monopolistically competitive firm's demand curve is

answer

question

the monopolistically competitive firms economic profit per unit when producing at Q1 units of output

answer

question

which of the following contributed to making the American auto industry into a differentiated oligopoly for nearly a century?

answer

entry barriers into the auto manufacturing industry

the strategic behavior of competitors

mergers to help gain economies scale

the metal interdependent of each firm's profitability

question

oligopolies must consider the possible reaction of rivals to its own __,__ and __ decisions.

answer

pricing, output, advertising

question

all of the following are examples of oligopolies that produce a differentiated product except

answer

copper

question

in monopolistically competitive industries

answer

collusion is unlikely because there is a large number of firms

question

one of the largest barriers to entry into the refining industry is

answer

the capital equipment investment

question

all of the following are reasons why firms might merge, except:

answer

to decrease monopoly power

question

in the figure, excess capacity

answer

is the gap between Q3 and Q4

question

the elasticities of the demand curves for firms in monopolistically competitive (MC) industries will become more like that firms in pure competition as

answer

question

monopolistically competitive firms advertise in order to

answer

make consumers demand curve more elastic

question

In monopolistically competitive industries

answer

firms feel independent of one another, allowing them to determine their own price without considering the possible reactions by rival firms

question

a situation in which each firm's profit depends not entirely on its own price and sales strategies but also on those of other firms is known as __.

answer

mutual interdependence

(note the key word "depends" in the question)

question

an example of an oligopoly that produces a standardized product is the market for

answer

cement

question

in the figure, why is allocative efficiency not achieved?

answer

question

in the figure, does the monopolistically competitive firm achieve productive efficiency?

answer

it does not achieve productive efficiency because it does not produce at eh lowest average total cost.

question

monopolistically competitive firms typically have a relatively _small_ share of the market and consequently _limited_ control over market price

answer

small; limited

question

a major trade-off that occurs in monopolistically competitive industries as product differentiation increases is

answer

excess capacity increases

question

which of the following turns out variations of a particular product?

answer

monopolistically competitive firms

question

true or false: strategic behavior takes into account the reactions of others

answer

true

question

a monopolistically competitive firm may be able to continue earning profit in the long run

answer

through further product differentiation

(the stronger the product differentiation (variety), the greater the excess capacity)

question

which of the following represents the most significant benefits to society generated by monopolistically competitive markets?

answer

product differentiation

question

when firms differentiate their products so that consumers are willing to pay more, firms do not _maximize_ output capacity and do not produce at the _lowest average_ total cost.

answer

maximize; lowest average

question

what should B-Balls do in regard to output for their basketballs to help minimize losses until some firms exit the industry?

answer

they should reduce output to wherever their new MR curve equals the MC curve caused by a shift in demand leftward

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