Multiple Choice Questions

The simplest type of oligopoly is
  • subsidies.
  • legal duopoly.
  • all are correct
  • duopoly.
In an oligopoly, each firm knows that its profits
  • depend on both how much output it produces and how much output its rival firms produce.
  • a firm will have chosen its best strategy, given the strategies chosen by other firms in the market.
  • price approaches marginal cost, and the quantity approaches the socially efficient level.
  • when demand is elastic, marginal revenue is positive and when demand is inelastic, marginal revenue is negative.
entry into a competitive market by new firms will increase the
  • all are correct
  • supply of good
  • zero economic profits
  • Cable Services
Hotels in New York City frequently experience an average vacancy rate of about 20 percent (i.e., on an average night, 80 percent of the hotel rooms are full). This kind of excess capacity is indicative of what kind of market?
  • equal to
  • marginal revenue is equal to marginal cost
  • average total cost
  • monopolistic competition
Consider a perfectly competitive market that was in a long-run equilibrium when a permanent increase in demand occurs. Which of the following will occur as a result?
  • . the negative externality associated with entry of new firms in a monopolistically competitive market.
  • 8) Price discrimination occurs when a firm lower price, economic losses by rutabaga farmers, and exit from the market.
  • i. The existing firms will start to earn an economic profit.ii. New firms will be motivated to enter the market.
  • downward-sloping demand curve because the firm's product is different from those offered by other firms.
Copy of In the language of game theory, a situation in which each person must consider how others might respond to his or her own actions is called a
  • a Nash equilibrium
  • Cable Services
  • zero economic profits
  • strategic situation.
A business-stealing externality is
  • is best for the player, regardless of what strategies other players follow.
  • excess capacity applies to monopolistically competitive firms but not to competitive firms.
  • when demand is elastic, marginal revenue is positive and when demand is inelastic, marginal revenue is negative.
  • . the negative externality associated with entry of new firms in a monopolistically competitive market.
When a firm is able to engage in perfect price discrimination, its marginal revenue curve
  • average total cost
  • no one firm can dominate the market.
  • a product-variety externality is said to occur
  • is the same as its demand curve.
The equilibrium quantity in markets characterized by oligopoly is
  • downward-sloping demand curve because the firm's product is different from those offered by other firms.
  • many firms selling products that are similar but not identical.
  • higher than in monopoly markets and lower than in perfectly competitive markets.
  • lower than in monopoly markets and higher than in perfectly competitive markets.
Economists use game theory to analyze strategic behavior, which takes into account
  • how people behave in strategic situations
  • the expected behavior of others and the recognition of mutual interdependence.
  • the short run but not in the long run.
  • . the negative externality associated with entry of new firms in a monopolistically competitive market.
When consumers are exposed to additional choices that result from the introduction of a new product in monopolistic competitive market,
  • a product-variety externality is said to occur
  • is the same as its demand curve.
  • (i)monopolistic competition(ii)perfect competition
  • it has a deadweight loss, just as monopoly does.
which of the following goods are not likely to be sold in monopolistically competitive markets?
  • a Nash equilibrium
  • natural monopoly
  • Cable Services
  • no one firm can dominate the market.
A monopolist can make an economic profit in the long run because of
  • It shifts leftward.
  • barriers to entry.
  • above marginal cost
  • both a monopoly and a competitive firm.
antitrust laws allow the government to
  • all of the above are correct
  • all players follow a strategy that they have no incentive to change.
  • Monopolistic competition
  • its demand curve is horizontal.
An example of a firm in monopolistic competition is
  • the short run but not in the long run.
  • a. marginal revenue equals marginal cost.
  • many firms selling products that are similar but not identical.
  • the many Chinese restaurants in San Francisco.
A cartel is
  • a group of firms acting together to raise price, decrease output, and increase economic profit.
  • . the negative externality associated with entry of new firms in a monopolistically competitive market.
  • each duopolist wants a larger share of the market in order to capture more profit.
  • firms will earn the highest profit when they cooperate and behave like a monopolist
the focus of antitrust legislation is to
  • Monopolistic competition
  • all are correct
  • maintain competition
  • Same as monopolist
46) Monopolies are socially inefficient because the price they charge is
  • barriers to entry.
  • b. above demand .
  • as a single monopolist.
  • It shifts leftward.
A perfectly competitive firm's short-run supply curve is
  • marginal revenue is equal to marginal cost.
  • it has a deadweight loss, just as monopoly does.
  • disadvantages of not having cooperation
  • its marginal cost curve above the AVC curve.
For a firm in monopolistic competition, the efficient scale is the amount of output at which ________ is a minimum.
  • strategic situation.
  • is the same as its demand curve.
  • above marginal cost
  • average total cost
A concentration ratio
  • a. are examples of government-created monopolies.
  • average total cost
  • legal duopoly.
  • all are correct
A monopoly produces a product ________ and there ________ barriers to entry into the market.
  • is the same as its demand curve.
  • both a monopoly and a competitive firm.
  • its marginal revenue is less than $3.56.
  • with no close substitutes; are
as a group, oligopolists would always be better off if they would act collectively
  • monopolistic competition
  • above marginal cost
  • as a single monopolist.
  • cooperation and self interest
A firm in a monopolistically competitive market faces a
  • downward-sloping demand curve because the firm's product is different from those offered by other firms.
  • lower than in monopoly markets and higher than in perfectly competitive markets.
  • higher than in monopoly markets and lower than in perfectly competitive markets.
  • the best strategy for a player to follow, regardless of the strategies followed by other players
A distinguishing feature of an oligopolistic industry is the tension between
  • both a monopoly and a competitive firm.
  • the short run but not in the long run.
  • cooperation and self interest
  • barriers to entry.
in a game, a dominant strategy is
  • the best strategy for a player to follow, regardless of the strategies followed by other players
  • a perfect substitute for another farmer's barley.
  • . the negative externality associated with entry of new firms in a monopolistically competitive market.
  • excess capacity applies to monopolistically competitive firms but not to competitive firms.
Business stealing externality occurs in which type of market
  • Monopolistic competition
  • as a single monopolist.
  • no one firm can dominate the market.
  • cooperation and self interest
The relationship between marginal revenue and elasticity is
  • . the negative externality associated with entry of new firms in a monopolistically competitive market.
  • lower than in monopoly markets and higher than in perfectly competitive markets.
  • downward-sloping demand curve because the firm's product is different from those offered by other firms.
  • when demand is elastic, marginal revenue is positive and when demand is inelastic, marginal revenue is negative.
If two duopolists can stick to a cartel agreement to boost their prices, then both
  • (i)monopolistic competition(ii)perfect competition
  • rise, and product diversity in the market decreases.
  • the short run but not in the long run.
  • make greater economic profits than if they did not collude
Monopolies are socially inefficient because the price they charge is
  • both a monopoly and a competitive firm.
  • a. marginal revenue equals marginal cost.
  • b. above demand .
  • above marginal cost
In which of the following market structures is(are) there a large number of sellers?
  • make greater economic profits than if they did not collude
  • the many Chinese restaurants in San Francisco.
  • (i)monopolistic competition(ii)perfect competition
  • economic losses, but not economic profits, can persist in the long run.
n the long run, firms in perfectly competitive market produce at a level that is ________ the efficient scale of output.
  • It shifts leftward.
  • average total cost
  • equal to
  • all are correct
In a long-run equilibrium,
  • all players follow a strategy that they have no incentive to change.
  • excess capacity applies to monopolistically competitive firms but not to competitive firms.
  • Correctc. has a Nash equilibrium, but the Nash equilibrium outcome is not the outcome the players would agree to if they could cooperate with each other.
  • is best for the player, regardless of what strategies other players follow.
In a market characterized by oligopoly:
  • a firm will have chosen its best strategy, given the strategies chosen by other firms in the market.
  • firms will earn the highest profit when they cooperate and behave like a monopolist
  • depend on both how much output it produces and how much output its rival firms produce.
  • excess capacity applies to monopolistically competitive firms but not to competitive firms.
An equilibrium occurs in a game when
  • lower than in monopoly markets and higher than in perfectly competitive markets.
  • all players follow a strategy that they have no incentive to change.
  • all of the above are correct
  • is able to sell different units of a good at different prices.
42) For a monopolistically competitive firm,
  • at the profit-maximizing quantity of output, price equals the minimum of averagetotal cost.
  • depend on both how much output it produces and how much output its rival firms produce.
  • the best strategy for a player to follow, regardless of the strategies followed by other players
  • downward-sloping demand curve because the firm's product is different from those offered by other firms.
Entry and exit drive each firm in a monopolistically competitive market to a point of tangency between its
  • no one firm can dominate the market.
  • is the same as its demand curve.
  • demand curve and its average total cost curve.
  • make greater economic profits than if they did not collude
The competitive firm's long-run supply curve is that portion of the marginal cost curve that lies above
  • all are correct
  • legal duopoly.
  • barriers to entry.
  • average total cost
the prisoners dilemma provides insights into the
  • disadvantages of not having cooperation
  • all are correct
  • is the same as its demand curve.
  • the short run but not in the long run.
In general, game theory is the study of
  • strategic situation.
  • a. are examples of government-created monopolies.
  • how people behave in strategic situations
  • marginal revenue is equal to marginal cost.
An agreement between two duopolists to function as a monopolist usually breaks down because
  • each duopolist wants a larger share of the market in order to capture more profit.
  • agree on the total level of production and on the amount produced by each member.
  • as a single monopolist.
  • a group of firms acting together to raise price, decrease output, and increase economic profit.
In the language of game theory, a situation in which each person must consider how others might respond to his or her own actions is called a
  • It shifts leftward.
  • strategic situation.
  • the expected behavior of others and the recognition of mutual interdependence.
  • all are correct
We know that a perfectly competitive firm is a price taker because
  • it has a deadweight loss, just as monopoly does.
  • its marginal cost curve above the AVC curve.
  • both a monopoly and a competitive firm.
  • its demand curve is horizontal.
When an oligopoly market reaches a Nash equilibrium,
  • depend on both how much output it produces and how much output its rival firms produce.
  • lower than in monopoly markets and higher than in perfectly competitive markets.
  • a firm will have chosen its best strategy, given the strategies chosen by other firms in the market.
  • higher than in monopoly markets and lower than in perfectly competitive markets.
Suppose that marginal revenue for a perfectly competitive firm is $20 . When the firm produces 10 units, its marginal cost is $20, its average total cost is $22, and its average variable cost is $Then to maximize its profit in the short run, the firm
  • rise, and product diversity in the market decreases.
  • a product-variety externality is said to occur
  • is able to sell different units of a good at different prices.
  • should stay open and incur an economic loss of $20.
The free entry and exit of firms in a monopolistically competitive market guarantees that
  • (i)monopolistic competition(ii)perfect competition
  • economic losses, but not economic profits, can persist in the long run.
  • a product-variety externality is said to occur
  • rise, and product diversity in the market decreases.
As firms exit a monopolistically competitive market, profits of remaining firms
  • (i)monopolistic competition(ii)perfect competition
  • a perfect substitute for another farmer's barley.
  • its demand curve is horizontal.
  • rise, and product diversity in the market decreases.
A perfectly competitive firm maximizes its profit by producing at the point where
  • a. marginal revenue equals marginal cost.
  • with no close substitutes; are
  • its marginal revenue is less than $3.56.
  • marginal revenue is equal to marginal cost.
The equilibrium price in a market characterized by oligopoly is
  • all players follow a strategy that they have no incentive to change.
  • lower than in monopoly markets and higher than in perfectly competitive markets.
  • price approaches marginal cost, and the quantity approaches the socially efficient level.
  • when demand is elastic, marginal revenue is positive and when demand is inelastic, marginal revenue is negative.
A profit-maximizing firm in a monopolistically competitive market is characterized by which of the following?
  • legal duopoly.
  • all correct
  • average total cost
  • free entry
In an oligopoly, output is
  • the best strategy for a player to follow, regardless of the strategies followed by other players
  • somewhere between the output in monopoly and that in perfect competition outcomes
  • excess capacity applies to monopolistically competitive firms but not to competitive firms.
  • depend on both how much output it produces and how much output its rival firms produce.
If a firm, Best Computer Buys, requires its customers to buy software from it whenever the customers purchase a computer, the company's policy is called
  • a tying arrangement
  • b. above demand .
  • average total cost
  • natural monopoly
A monopolistically competitive industry is characterized by
  • make greater economic profits than if they did not collude
  • both a monopoly and a competitive firm.
  • is able to sell different units of a good at different prices.
  • many firms selling products that are similar but not identical.
excess capacity is
  • a characteristic of rising average total cost curves.
  • a perfect substitute for another farmer's barley.
  • excess capacity applies to monopolistically competitive firms but not to competitive firms.
  • a. are examples of government-created monopolies.
If a monopolistically competitive seller's marginal cost is $3.56, the firm will decrease its output if
  • its marginal cost curve above the AVC curve.
  • both a monopoly and a competitive firm.
  • a. marginal revenue equals marginal cost.
  • its marginal revenue is less than $3.56.
an outcome in which all players choose the best strategy they can, given the choices of all other players
  • above marginal cost
  • strategic situation.
  • a Nash equilibrium
  • legal duopoly.
Monopolistic competition is an inefficient market structure because
  • its demand curve is horizontal.
  • both a monopoly and a competitive firm.
  • barriers to entry.
  • it has a deadweight loss, just as monopoly does.
As a group, oligopolists would always be better off if they would act collectively
  • each duopolist wants a larger share of the market in order to capture more profit.
  • as a single monopolist.
  • its marginal revenue is less than $3.56.
  • monopolistic competition
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Multiple Choice Questions
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