Multiple Choice Questions

The goal of product differentiation and advertising in monopolistic competition is to make:
  • price less of a factor and product differences more of a factor in consumer purchases.
  • there is some control over price in monopolistic competition.
  • considers the reactions of its rivals when it determines its price policy.
  • each firm can increase its output and thus its profits by cutting price.
Which industry would be considered to be monopolistically competitive?
  • Standard weekday and weekend hours
  • marginal revenue curve.
  • Retail trade
  • Local dry cleaners
In the long run, a representative firm in a monopolistically competitive industry will typically:
  • may be able to earn positive economic profits.
  • earn a normal profit, but not an economic profit.
  • how the going price gets determined in the first place
  • marginal revenue curve.
The monopolistically competitive seller's demand curve will become more elastic the
  • larger the number of competitors.
  • how the going price gets determined in the first place
  • Standard weekday and weekend hours
  • make no change in the level of output
Which product is made by an industry that best illustrates the concept of homogeneous oligopoly?
  • Copper
  • Retail trade
  • Profits
  • Local dry cleaners
Which is not a form of product differentiation for the monopolistically competitive firm?
  • A perfectly elastic firm demand curve
  • Local dry cleaners
  • larger the number of competitors.
  • Standard weekday and weekend hours
Allocative and productive efficiency are achieved under the market structure of:
  • Local dry cleaners
  • pure competition.
  • marginal revenue curve.
  • Retail trade
Collusive control over price may permit oligopolists to:
  • be self-canceling and contribute to economic inefficiency.
  • reduce uncertainty, increase profits, and possibly limit entry of new firms.
  • each firm can increase its output and thus its profits by cutting price.
  • Firms may experience positive economic profits in the long run since barriers to entry are significant.
If an oligopolist's demand curve has a "kink" in it, then
  • reduce uncertainty, increase profits, and possibly limit entry of new firms.
  • over some interval, a change in the oligopolist's marginal cost will not cause a change in the oligopolist's profit-maximizing price.
  • Firms may experience positive economic profits in the long run since barriers to entry are significant.
  • each firm can increase its output and thus its profits by cutting price.
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
  • each firm can increase its output and thus its profits by cutting price.
  • be self-canceling and contribute to economic inefficiency.
  • hold price constant when the firm changes its prices.
  • how the going price gets determined in the first place
Which cannot be a characteristic of an oligopolistic industry?
  • A perfectly elastic firm demand curve
  • larger the number of competitors.
  • be self-canceling and contribute to economic inefficiency.
  • Standard weekday and weekend hours
In the long run an oligopoly:
  • earn a normal profit, but not an economic profit.
  • A perfectly elastic firm demand curve
  • marginal revenue curve.
  • may be able to earn positive economic profits.
A potential negative effect of advertising for society is that it can:
  • there is some control over price in monopolistic competition.
  • A perfectly elastic firm demand curve
  • be self-canceling and contribute to economic inefficiency.
  • each firm can increase its output and thus its profits by cutting price.
One shortcoming of the kinked-demand curve model of oligopoly is it does not explain
  • there is some control over price in monopolistic competition.
  • how the going price gets determined in the first place
  • larger the number of competitors.
  • earn a normal profit, but not an economic profit.
In the kinked-demand model, there will be a vertical break in the firm's:
  • marginal revenue curve.
  • Local dry cleaners
  • larger the number of competitors.
  • Retail trade
Mutual interdependence means that each firm in an oligopolistic industry:
  • there is some control over price in monopolistic competition.
  • considers the reactions of its rivals when it determines its price policy.
  • price less of a factor and product differences more of a factor in consumer purchases.
  • each firm can increase its output and thus its profits by cutting price.
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Multiple Choice Questions
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