Question 1

Which of the following is one of the defining characteristics of an oligopoly?

Accepted Answer

A)  The strategic interactions between a firm and its rivals have a major impact on each firm's profits.
B)  No single firm has an impact on the market as a whole.
C)  There are only a few buyers in the market.
D)  There are no barriers to entry to the market.E) A) and C)
F) B) and D)

Question 2

If the demand curve for a firm in a monopolistically competitive market is shifting to the right, it will stop shifting when:

Accepted Answer

A)  the firm raises its price.
B)  the firm lowers its price.
C)  firms stop entering the market.
D)  firms stop exiting the market.E) B) and C)
F) All of the above

Question 3

When the price effect outweighs the quantity effect, the oligopolistic firm:

Accepted Answer

A)  has an incentive to increase output.
B)  has no incentive to decrease output.
C)  has no incentive to increase output.
D)  None of these is true.E) B) and D)
F) A) and B)

Question 4

If firms in a monopolistically competitive market are earning negative economic profits, the demand curve of a single firm will likely shift to the _______ as other firms _______ the industry.

Accepted Answer

A)  right; exit
B)  left; exit
C)  right; enter
D)  left; enterE) C) and D)
F) B) and D)

Question 5

The act of firms working together to make decisions about price and quantity is called:

Accepted Answer

A)  collusion.
B)  price discrimination.
C)  bulk ordering.
D)  artificial competition.E) A) and B)
F) A) and C)

Question 6

How do most countries handle cartels?

Accepted Answer

A)  They protect cartels.
B)  They have laws against firms making agreements about prices or quantities.
C)  They impose strict regulations on advertising.
D)  They allow cartels to exist, because it is often too difficult to regulate them.E) A) and D)
F) A) and C)

Question 7

If a monopolistically competitive firm is suffering losses in the short run, the exit of competing from the market will:

Accepted Answer

A)  shift the firm's demand to the right.
B)  shift the firm's demand to the left.
C)  cause price to drop, but will not affect the firm's demand curve.
D)  cause price to rise, but will not affect the firm's demand curve.E) B) and C)
F) A) and C)

Question 8

When the quantity effect outweighs the price effect, firms in an oligopoly may have an incentive to:

Accepted Answer

A)  increase output.
B)  decrease output.
C)  maintain the level of output.
D)  exit the industry.E) B) and D)
F) A) and D)

Question 9

The long-run outcome of the monopolistically competitive firm:

Accepted Answer

A)  is not efficient.
B)  does not maximize profits.
C)  is the same as the short run outcome.
D)  maximizes total surplus.E) A) and B)
F) B) and D)

Question 10

The graph shown displays the cost and revenue curves associated with a monopolistically competitive firm.  If the firm produces Q1 and charges P3, then area C represents:

Accepted Answer

A)  producer surplus.
B)  consumer surplus.
C)  deadweight loss.
D)  profits.E) B) and D)
F) B) and C)

Question 11

A monopolistically competitive firm can achieve product differentiation by creating:

Accepted Answer

A)  a truly unique product.
B)  the perception of differences in its product.
C)  a product that cannot be easily substituted with a competitor's product.
D)  All of these are true.E) B) and D)
F) C) and D)

Question 12

The graph shown displays the cost and revenue curves associated with a monopolistically competitive firm.  This firm will earn:

Accepted Answer

A)  positive profits equal to area A.
B)  positive profits equal to area C.
C)  negative profits (a loss) equal to area A.
D)  negative profits (a loss) equal to area B.E) A) and B)
F) All of the above

Question 13

If we were to compare the monopolistically competitive firm's long-run outcome to that of a perfectly competitive firm, we would conclude that the monopolistically competitive firm:

Accepted Answer

A)  creates less consumer surplus.
B)  produces more output.
C)  earns the same profit.
D)  All of these are true.E) A) and C)
F) None of the above

Question 14

When a single firm in an oligopolistic market decides to increase output, that firm:

Accepted Answer

A)  feels the quantity effect, but other firms feel the price effect.
B)  feels both the quantity and price effects, but other firms only feel the price effect.
C)  feels the price effect, but other firms feel the quantity effect.
D)  feels the price effect, but other firms feel both the price and quantity effects.E) A) and B)
F) A) and C)

Question 15

Long run economic profits are possible in which of the following market structures? Oligopoly Monopolistic competition Monopoly

Accepted Answer

A)  I and II only
B)  I and III only
C)  III only
D)  I, II, and IIIE) A) and D)
F) B) and D)

Question 16

The process of entry and exit into a monopolistically competitive market continues until:

Accepted Answer

A)  profits are zero.
B)  long run equilibrium is reached.
C)  price is equal to average total cost.
D)  All of these are true.E) A) and B)
F) B) and D)

Question 17

When the quantity effect outweighs the price effect, the oligopolistic firm may find it optimal to:

Accepted Answer

A)  exit the industry.
B)  collude.
C)  increase output.
D)  decrease output.E) None of the above
F) A) and B)

Question 18

Large barriers to entry exist in which of the following market structures? Perfection competition Oligopoly Monopoly

Accepted Answer

A)  I and II only
B)  III only
C)  II and III only
D)  I, II, and IIIE) C) and D)
F) B) and D)

Question 19

The graph shown displays the cost and revenue curves associated with a monopolistically competitive firm.  If the firm is producing Q1 and charging P3, it is likely:

Accepted Answer

A)  in long run equilibrium.
B)  at an efficient outcome.
C)  not maximizing profits.
D)  operating at a loss.E) A) and B)
F) A) and C)

Question 20

In practice, oligopolistic markets are:

Accepted Answer

A)  fairly common.
B)  very rare.
C)  forbidden by the government.
D)  usually protected by the government.E) A) and B)
F) A) and C)

Exam 15: Monopolistic Competition and Oligopoly

The act of firms working together to make decisions about price and quantity is called:

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In practice, oligopolistic markets are:

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How do most countries handle cartels?

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The process of entry and exit into a monopolistically competitive market continues until:

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If the demand curve for a firm in a monopolistically competitive market is shifting to the right, it will stop shifting when:

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Large barriers to entry exist in which of the following market structures? Perfection competition Oligopoly Monopoly

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The graph shown displays the cost and revenue curves associated with a monopolistically competitive firm. This firm will earn:

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If we were to compare the monopolistically competitive firm's long-run outcome to that of a perfectly competitive firm, we would conclude that the monopolistically competitive firm:

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When a single firm in an oligopolistic market decides to increase output, that firm:

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When the price effect outweighs the quantity effect, the oligopolistic firm:

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Long run economic profits are possible in which of the following market structures? Oligopoly Monopolistic competition Monopoly

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The graph shown displays the cost and revenue curves associated with a monopolistically competitive firm. If the firm is producing Q1 and charging P3, it is likely:

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Which of the following is one of the defining characteristics of an oligopoly?

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If firms in a monopolistically competitive market are earning negative economic profits, the demand curve of a single firm will likely shift to the _______ as other firms _______ the industry.

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The graph shown displays the cost and revenue curves associated with a monopolistically competitive firm. If the firm produces Q1 and charges P3, then area C represents:

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When the quantity effect outweighs the price effect, the oligopolistic firm may find it optimal to:

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The long-run outcome of the monopolistically competitive firm:

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A monopolistically competitive firm can achieve product differentiation by creating:

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When the quantity effect outweighs the price effect, firms in an oligopoly may have an incentive to:

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If a monopolistically competitive firm is suffering losses in the short run, the exit of competing from the market will:

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If firms in a monopolistically competitive market are earning negative economic profits, the demand curve of a single firm will likely shift to the _ as other firms _ the industry.

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