Question 1

Price rigidity:

Accepted Answer

A)   refers to the inability for firms to change price because of consumer reaction.
B)   is usually an indication of collusive agreements in an industry.
C)   is the tendency for all firms in an industry to charge approximately the same price for a specific product over long periods of time.
D)   is the tendency for all firms in an industry to charge approximately the same price for a specific product over a short period of time even though prices may vary widely over long periods of time.
E)   is almost never an indication of collusive agreements in an industry.F) B) and E)
G) D) and E)

Question 2

The monopolistically competitive firm understands that the relevant portion of its demand curve is highly elastic.

Accepted Answer

A) True 
 B)False

Question 3

Capital requirements are a barrier to entry because a new entrant may have to make huge investments in order to participate in the industry.

Accepted Answer

A) True 
 B)False

Question 4

You believe that you have a costless monopoly. Given your estimate of the demand for mushrooms: Qm = 1500 - 200Pm, where Qm = servings of fried mushroom and gravy, a price of $3.75 and a quantity of 750 would yield you a maximum total revenue.

Accepted Answer

A) True 
 B)False

Question 5

A market share curve is the market demand curve for monopolistic firms.

Accepted Answer

A) True 
 B)False

Question 6

In a market characterized by price leadership by a dominant firm, the smaller firms accept the price determined by the large firm.

Accepted Answer

A) True 
 B)False

Question 7

Suppose an oligopoly firm has the the following cost and revenue data.
  
a. Fill in the blank spaces in the table.
a. What output should the firm produce? Why?
b. What price should the firm charge, and what will be its economic profit.

Accepted Answer

a. <img  loading="lazy" src="/assets/images/blured-textbook.svg" class="d-inline m-1" alt="blured image" width="139" height="30"> b. The firm would seek to produce at...

Question 8

The efficient firm case of price leadership is characterized by which of the following?

Accepted Answer

A)   a firm with lower marginal and average costs
B)   a firm which can sustain losses for a period of time
C)   a firm which can establish a monopoly price based on the market demand curve
D)   a firm which has the ability to drive smaller rival firms from the market.
E)   the threat of action by the anti-trust division of the Justice Department under the predatory price cutting rules if it was felt that the dominant firm had cut its price to an unreasonably low level in order to eliminate competition.F) A) and B)
G) None of the above

Question 9

Under monopolistic competition, each seller firm attempts to retain or increase its market share by differentiating its product from the output of other firms.

Accepted Answer

A) True 
 B)False

Question 10

Becky's Bookshelves currently sells 50 bookshelves a month for $160.00. Becky is going to begin a series of advertisements in order to boost her sales. With a market share curve described by QM = 150-.5P, Becky will be able to sell 100 bookshelves at her current price.

Accepted Answer

A) True 
 B)False

Question 11

The kinked demand curve model assumes that an oligopolistic firm recognizes its mutual interdependence with other firms and:

Accepted Answer

A)   while it does not collude with them, each firm acting independently, has determined that it can not gain by departing from the prevailing price.
B)   while it does not collude with them, each firm acting independently, has determined that it has much to be gained by departing from the prevailing price.
C)   collusive agreements in the industry lead to the tendency for all firms in an industry to charge approximately the same price for a specific product over long periods of time.
D)   collusive agreements in the industry lead to the tendency for all firms in an industry to charge approximately the same price for a specific product over a short period of time even though prices may vary widely over long periods of time.
E)   while it does not collude with them, each firm acting independently, has determined that it can not gain by departing from the prevailing price set by the industry leader.F) A) and E)
G) A) and D)

Question 12

Oligopoly is a market structure characterized by few sellers and interfirm rivalry.

Accepted Answer

A) True 
 B)False

Question 13

Entry limit pricing is a barrier to entry because it is the practice of setting a price lower than the one that maximizes profit.

Accepted Answer

A) True 
 B)False

Question 14

A cartel is maximizing profit at a price of $56.50 per ton for its product. The demand curve for the members' product is given by the following equation:
Q = 83,000 - 1000P, so that MR = 83 - .002Q
Suppose that there are three firms in the cartel with the following respective marginal cost functions:
MC1 = 5 + .002Q1,
MC2 = 3 + .003Q2,
and
MC3 = 2.5 + .0055Q3
How much output should be allocated to each cartel member? Assume that Q is yearly output in tons and that MC is marginal cost per ton)

Accepted Answer

Total cartel output is found at:
Q = 83,...

Question 15

The dominant firm case of price leadership is characterized by all of the following EXCEPT:

Accepted Answer

A)   a firm with lower marginal and average costs
B)   a firm which can sustain losses for a period of time
C)   a firm which can establish a monopoly price based on the market demand curve
D)   a firm which has the ability to drive smaller rival firms from the market.
E)   the threat of action by the anti-trust division of the Justice Department under the predatory price cutting rules if it was felt that the dominant firm had cut its price to an unreasonably low level in order to eliminate competition.F) A) and B)
G) A) and C)

Exam 9: Monopolistic Competition and Oligopoly

Price rigidity:

Correct Answer
verified

Correct Answer
verified
Total cartel output is found at:
Q = 83,...
View Answer

Under monopolistic competition, each seller firm attempts to retain or increase its market share by differentiating its product from the output of other firms.

Correct Answer
verified

Suppose an oligopoly firm has the the following cost and revenue data. a. Fill in the blank spaces in the table. a. What output should the firm produce? Why? b. What price should the firm charge, and what will be its economic profit.

Correct Answer
verified
a. b. The firm would seek to produce at...
View Answer

A market share curve is the market demand curve for monopolistic firms.

Correct Answer
verified

The monopolistically competitive firm understands that the relevant portion of its demand curve is highly elastic.

Correct Answer
verified

The efficient firm case of price leadership is characterized by which of the following?

Correct Answer
verified

Entry limit pricing is a barrier to entry because it is the practice of setting a price lower than the one that maximizes profit.

Correct Answer
verified

Oligopoly is a market structure characterized by few sellers and interfirm rivalry.

Correct Answer
verified

In a market characterized by price leadership by a dominant firm, the smaller firms accept the price determined by the large firm.

Correct Answer
verified

The kinked demand curve model assumes that an oligopolistic firm recognizes its mutual interdependence with other firms and:

Correct Answer
verified

Capital requirements are a barrier to entry because a new entrant may have to make huge investments in order to participate in the industry.

Correct Answer
verified

You believe that you have a costless monopoly. Given your estimate of the demand for mushrooms: Q_m = 1500 - 200P_m,where Q_m = servings of fried mushroom and gravy, a price of $3.75 and a quantity of 750 would yield you a maximum total revenue.

Correct Answer
verified

The dominant firm case of price leadership is characterized by all of the following EXCEPT:

Correct Answer
verified

Becky's Bookshelves currently sells 50 bookshelves a month for $160.00. Becky is going to begin a series of advertisements in order to boost her sales. With a market share curve described by Q_M = 150-.5P, Becky will be able to sell 100 bookshelves at her current price.

Correct Answer
verified

Exam 9: Monopolistic Competition and Oligopoly

Price rigidity:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedTotal cartel output is found at:Q = 83,...View AnswerShow Answer

Under monopolistic competition, each seller firm attempts to retain or increase its market share by differentiating its product from the output of other firms.

Correct AnswerverifiedShow Answer

Suppose an oligopoly firm has the the following cost and revenue data. a. Fill in the blank spaces in the table. a. What output should the firm produce? Why? b. What price should the firm charge, and what will be its economic profit.

Correct Answerverifieda. b. The firm would seek to produce at...View AnswerShow Answer

A market share curve is the market demand curve for monopolistic firms.

Correct AnswerverifiedShow Answer

The monopolistically competitive firm understands that the relevant portion of its demand curve is highly elastic.

Correct AnswerverifiedShow Answer

The efficient firm case of price leadership is characterized by which of the following?

Correct AnswerverifiedShow Answer

Entry limit pricing is a barrier to entry because it is the practice of setting a price lower than the one that maximizes profit.

Correct AnswerverifiedShow Answer

Oligopoly is a market structure characterized by few sellers and interfirm rivalry.

Correct AnswerverifiedShow Answer

In a market characterized by price leadership by a dominant firm, the smaller firms accept the price determined by the large firm.

Correct AnswerverifiedShow Answer

The kinked demand curve model assumes that an oligopolistic firm recognizes its mutual interdependence with other firms and:

Correct AnswerverifiedShow Answer

Capital requirements are a barrier to entry because a new entrant may have to make huge investments in order to participate in the industry.

Correct AnswerverifiedShow Answer

You believe that you have a costless monopoly. Given your estimate of the demand for mushrooms: Qm = 1500 - 200Pm, where Qm = servings of fried mushroom and gravy, a price of $3.75 and a quantity of 750 would yield you a maximum total revenue.

Correct AnswerverifiedShow Answer

The dominant firm case of price leadership is characterized by all of the following EXCEPT:

Correct AnswerverifiedShow Answer

Becky's Bookshelves currently sells 50 bookshelves a month for $160.00. Becky is going to begin a series of advertisements in order to boost her sales. With a market share curve described by QM = 150-.5P, Becky will be able to sell 100 bookshelves at her current price.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified
Total cartel output is found at:
Q = 83,...
View Answer

Correct Answer
verified

Correct Answer
verified
a. b. The firm would seek to produce at...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

You believe that you have a costless monopoly. Given your estimate of the demand for mushrooms: Q_m = 1500 - 200P_m,where Q_m = servings of fried mushroom and gravy, a price of $3.75 and a quantity of 750 would yield you a maximum total revenue.

Correct Answer
verified

Correct Answer
verified

Becky's Bookshelves currently sells 50 bookshelves a month for $160.00. Becky is going to begin a series of advertisements in order to boost her sales. With a market share curve described by Q_M = 150-.5P, Becky will be able to sell 100 bookshelves at her current price.

Correct Answer
verified