Вы находитесь на странице: 1из 4

1. Monopolistic competition is characterized 6.

The price elasticity of a monopolistically


by a: competitive firm's demand curve varies:
A) few dominant firms and low entry barriers. A) inversely with the number of competitors and
B) large number of firms and substantial entry the degree of product differentiation.
barriers. B) directly with the number of competitors and
C) large number of firms and low entry barriers. the degree of product differentiation.
D) few dominant firms and substantial entry C) directly with the number of competitors, but
barriers. inversely with the degree of product
Answer: C differentiation.
D) inversely with the number of competitors, but
2. Which of the following is not a basic directly with the degree of product differentiation.
characteristic of monopolistic competition? Answer: C
A) the use of trademarks and brand names
B) recognized mutual interdependence 7. In short-run equilibrium, a
C) product differentiation monopolistically competitive firm sets it
D) a relatively large number of sellers price:
Answer: B A) equal to marginal revenue.
B) equal to marginal cost.
3. If the number of firms in a monopolistically C) above marginal cost.
competitive industry increases and the D) below marginal cost.
degree of product differentiation diminishes: Answer: C
A) the likelihood of realizing economic profits in
the long run would be enhanced. 8. In long-run equilibrium, the price charged
B) individual firms would now be operating at by the monopolistically competitive firm:
outputs where their average total costs would be A) must be less than ATC.
higher. B) must be more than ATC.
C) the industry would more closely approximate C) may be either equal to ATC, less than ATC,
pure competition. or more than ATC.
D) the likelihood of collusive pricing would D) will be equal to ATC.
increase. Answer: D
Answer: C
Use the following to answer questions 9-11:
4. Monopolistically competitive and purely
competitive industries are similar in that:
A) both are assured of short-run economic
profits.
B) both produce differentiated products.
C) the demand curves facing individual firms are
perfectly elastic in both industries.
D) there are few, if any, barriers to entry.
Answer: D

5. The larger the number of firms and the


smaller the degree of product differentiation
the:
A) greater the divergence between the demand
and the marginal revenue curves of the 9. Refer to the above diagram for a
monopolistically monopolistically competitive firm in short-
competitive firm. run equilibrium. This firm's profit-maximizing
B) larger will be the monopolistically competitive price will be:
firm's fixed costs. A) $10. B) $13. C) $16. D) $19.
C) less elastic is the monopolistically competitive Answer: C
firm's demand curve.
D) more elastic is the monopolistically
competitive firm's demand curve.
Answer: D
10. Refer to the above diagram for a A) If there are short-run losses, firms will leave
monopolistically competitive firm in short- the industry and the demand curves of the
run equilibrium. This firm will realize an remaining firms
economic: will shift to the right.
A) loss of $320. B) If there are short-run economic profits, firms
B) loss of $280. will enter the industry and the demand curves of
C) profit of $480. existing
D) profit of $600. firms will shift to the right.
E) profit of $360. C) If there are short-run losses, firms will leave
Answer: C the industry and the demand curves of the
remaining firms
11. Refer to the above diagram for a will shift to the left.
monopolistically competitive firm in short- D) If there are short-run economic profits, firms
run equilibrium. Assume the firm is part of will leave the industry and the demand curves of
an increasing-cost industry. In the long run the remaining firms will shift to the right.
firms will: Answer: A
A) leave this industry, causing both demand and
the ATC curve to shift upward. Use the following to answer questions 16-19:
B) enter this industry, causing demand to rise Answer the next question(s) based on the
and the ATC curve to shift downward. following demand and cost data for a
C) enter this industry, causing demand to fall specific firm
and the ATC curve to shift upward.
D) enter this industry, causing both demand and
the ATC curve to shift upward.
Answer: C

12. If some firms leave a monopolistically


competitive industry, the demand curves of
the remaining firms will:
A) be unaffected.
B) shift to the left.
C) become more elastic.
D) shift to the right. 16. If columns (1) and (3) of the demand data
Answer: D shown above are this firm's demand
schedule, the profit maximizing price will be:
13. Other things equal, if more firms enter a A) $9. B) $7. C) $11. D) $6.
monopolistically competitive industry: Answer: A
A) the demand curves facing existing firms
would shift to the right. 17. If columns (1) and (3) of the demand data
B) the demand curves facing existing firms shown above are this firm's demand
would shift to the left. schedule, economic profit will be:
C) the demand curves facing existing firms A) $10. B) $19. C) $6. D) $8.
would become less elastic. Answer: D
D) losses would necessarily occur.
Answer: B 18. Suppose that entry into the industry
changes this firm's demand schedule from
14. When a monopolistically competitive firm columns (1) and (3) shown above to columns
is in long-run equilibrium: (2) and (3). Economic profit will:
A) P = MC = ATC. A) fall by $10.
B) MR = MC and minimum ATC > P. B) fall to $6.
C) MR > MC and P = minimum ATC. C) increase by $10.
D) MR = MC and P > minimum ATC. D) decline to zero.
Answer: D Answer: D
15. Which of the following statements
concerning a monopolistically competitive
industry is correct?
19. With the demand schedule shown above Answer: A
by columns (2) and (3), in long-run
equilibrium: 25. Which of the following is a unique feature
A) price will equal average total cost. of oligopoly?
B) total cost will exceed total revenue. A) mutual interdependence
C) marginal cost will exceed price. B) advertising expenditures
D) price will equal marginal revenue. C) product differentiation
Answer: A D) nonprice competition
Answer: A
20. The term oligopoly indicates:
A) a one-firm industry. 26. Prices are likely to be least flexible:
B) many producers of a differentiated product. A) in oligopoly.
C) a few firms producing either a differentiated B) in monopolistic competition.
or a homogeneous product. C) where product demand is inelastic.
D) an industry whose four-firm concentration D) in pure competition.
ratio is low. Answer: A
Answer: C
27. Concentration ratios measure the:
21. Oligopolistic industries are characterized A) geographic location of the largest
by: corporations in each industry.
A) a few dominant firms and substantial entry B) degree to which product price exceeds
barriers. marginal cost in various industries.
B) a few dominant firms and no barriers to entry. C) percentage of total sales accounted for by the
C) a large number of firms and low entry four largest firms in the industry.
barriers. D) number of firms in an industry.
D) a few dominant firms and low entry barriers. Answer: C
Answer: A
28. An industry having a four-firm
22. The mutual interdependence that concentration ratio of 85 percent:
characterizes oligopoly arises because: A) approximates pure competition.
A) the products of various firms are B) is monopolistically competitive.
homogeneous. C) is a pure monopoly.
B) the products of various firms are D) is an oligopoly.
differentiated. Answer: D
C) a small number of firms produce a large
proportion of industry output. 29. The Herfindahl index for a pure
D) the demand curves of firms are kinked at the monopolist is:
prevailing price. A) 100. B) 10,000. C) 100,000. D) 10.
Answer: C Answer: B

23. Which of the following is the best 30. If a product such as cement or bricks is
example of oligopoly? costly to ship and, therefore, markets are
A) women's dress manufacturing very localized, the national concentration
B) automobile manufacturing ratio for that industry:
C) restaurants A) will be greater than 50 percent.
D) cotton farming B) may understate the degree of monopoly.
Answer: B C) may overstate the degree of monopoly.
D) will yield an accurate impression of the
24. If there are significant economies of scale degree of monopoly.
in an industry, then: Answer: B
A) a firm that is large may be able to produce at
a lower unit cost than can a small firm. 31. If you sum the squares of the market
B) a firm that is large will have to charge a shares of each firm in an industry (as
higher price than will a small firm. measured by percent of industry sales), you
C) entry to that industry will be easy. are calculating:
D) firms must differentiate their products to earn A) the four-firm concentration ratio.
economic profits. B) the Herfindahl index.
C) the degree of collusion. C) oligopoly.
D) the Lerner index. D) pure monopoly.
Answer: B Answer: C

32. OPEC provides an example of: 37. Refer to the data above. If Firm B merged
A) a tacit understanding. with Firm C, the industry's four-firm
B) noncollusive oligopoly. concentration ratio would ____ and its
C) an international cartel. Herfindahl Index would ____:
D) a monopolistically competitive industry. A) rise; rise.
Answer: C B) fall; rise
C) remain the same; rise.
33. Interindustry competition means that:
D) remain the same; fall.
A) in oligopolistic industries a few large firms
Answer: C
compete with one another in bidding down
product price. 38. Clear-cut mutual interdependence with
B) in some markets the producers of a particular respect to the price-output policies exists in:
product might face competition from products A) pure monopoly
produced B) oligopoly
by other industries. C) monopolistic competition
C) firms that sell a product at one stage of D) pure competition
production are faced with firms that buy the Answer: B
product at the next
stage of production. 39. Differentiated oligopoly exists where a
D) in most industries there are usually a number small number of firms are:
of firms producing identical products. A) producing goods that differ in terms of quality
Answer: B and design.
B) setting price and output collusively.
Use the following to answer questions 34-37: C) setting price and output independently.
D) producing virtually identical products.
Answer: A

40. Oligopoly is more difficult to analyze than


other market models because:
A) the number of firms is so large that market
behavior cannot be accurately predicted.
B) the marginal cost and marginal revenue
curves of an oligopolist play no part in the
determination of
34. Refer to the above data. The four-firm equilibrium price and quantity.
concentration ratio for this industry is: C) of mutual interdependence and the fact that
A) 90 percent. oligopoly outcomes are less certain than in other
B) 95 percent. market
C) 100 percent. models.
D) indeterminate, because we don't know which D) unlike the firms of other market models, it
four firms are included. cannot be assumed that oligopolists are profit
Answer: B maximizers.
Answer: C
35. Refer to the above data. The Herfindahl
Index for this industry is:
A) 95. B) 1000. C) 2925. D) 2950.
Answer: D

36. Refer to the above data. This industry


illustrates:
A) pure competition.
B) monopolistic competition.