1) Which of the following is an example of a barrier to entry?
High research and development costs
2). The downward slope of a monopolistically competitive market’s demand curve signifies ____.
that firms in the industry have a degree of market power.
3). In the classic prisoner’s dilemma, the unique equilibrium occurs when both players betray one another. Why do rational players choose to defect?
Each player will get a better outcome by defecting, regardless of the other player’s decision
4). In which of the following market structures do firms have no control over the price of goods and services?
Perfect competition
5). A monopoly market has which of the following characteristics?
Firms are price makers
6). Monopolies are ____________.
price makers who set prices and output levels
7). Suppose a T-shirt firm can make 100 shirts at a total cost of $450. If producing 101 t-shirts costs $456, what is the marginal cost of the 101st unit?
$6
8). Which of the following problems is NOT helped by advertising?
Brand loyalty decreasing competition among similar products.
9) Which of the following statements is NOT true of firms in a monopolistically competitive market in the short run?
Unlike a true monopoly, firms maximize profits at the point where MR=MC
10). A green beans producer expects an increase in demand for green beans, so he decides to raise his price above the market price to capitalize on this increase in demand. If the market for green beans is perfectly competitive, what will happen?
He will make nothing
11). If members of OPEC decided to compete instead of collude, what would be the result for the global oil market (ignoring the possibility of oil shortages)?
Lower prices and a higher quantity of oil
12). In the Prisoner’s Dilemma, the outcome in which both players cooperate is _________.
Pareto optimal
13). Monopolies choose to produce the quantity of output at which _________.
marginal revenue equals marginal cost
14). Why will a firm not exit an industry even if it is not making a profit?
It can still cover the variable costs of production.
15). At what point does a monopolistic competitive firm stop making economic profit?
When the demand curve and average total cost curve are tangent
16). Which of the following is an informal method of collusion that is generally exempt from legal repercussions?
Price leadership
17). Which of the following is a characteristic of monopolistic competition?
All of these answers
18). What distinguishes a government-granted monopoly from a government monopoly?
The holder of the government-granted monopoly is a private firm
19). When oligopoly firms collude to increase profits, what happens to the market equilibrium?
The quantity supplied by the two firms goes down and the price goes up
20). A monopolistic competitive market ____.
is likely inefficient.
21). In the Cournot model of duopoly competition, firms __________.
compete on quantity and not price
22). Collusion takes place when __________.
rival companies cooperate for their mutual benefit
23). Which of the following is NOT a reason that a consumer may be more likely to purchase a product that is heavily advertised?
Advertising is often more helpful than personal experience when determining the quality of a good.
24). The case of De Beers offers an example of what type of barrier to entry?
Resource control
25). Which of the following products are likely to exhibit network externalities?
All of the responses.
26). Which of the following does NOT result from granting a temporary monopoly to a firm or individual through a patent?
The patent provides an incentive to produce original creative works.
27). How does a monopoly market differ from a perfectly competitive market outcome?
Quantity is lower and prices are higher
28). Would you expect to see branding in a monopolistic competitive market?
Yes, because these firms must differentiate themselves from their competitor’s products.
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