Question 1

Which of the following phenomena is not explained by the existence of product differentiation?

Accepted Answer

A)   The need for consumer information services
B)   Intraindustry trade
C)   Price discrimination
D)   Advertising
E)   Brand loyaltyF) A) and E)
G) A) and D)

Question 2

Exhibit 11-2 
-Refer to Exhibit 11-2 for a profit-maximizing firm in a monopolistically competitive market. In the long run, the firm

Accepted Answer

A)   sells 120 units at a unit price of $20.
B)   sells 70 units at a unit price of $30.
C)   sells 70 units at a unit price of 20.
D)   sells 90 units at a unit price of $13.
E)   sells 90 units at a unit price of $30.F) B) and E)
G) A) and C)

Question 3

There is limited entry in a monopolistically competitive industry.

Accepted Answer

A) True 
 B)False

Question 4

Compared with a monopoly, long-run equilibrium in a monopolistically competitive industry results in

Accepted Answer

A)   lower prices and greater output.
B)   higher prices and lower output.
C)   lower prices and lower output.
D)   higher prices and greater output.
E)   prices and output that can be higher or lower.F) C) and D)
G) B) and E)

Question 5

Product differentiation exists when producers perceive the products to be different.

Accepted Answer

A) True 
 B)False

Question 6

Strategic behavior occurs in monopolistic competition.

Accepted Answer

A) True 
 B)False

Question 7

Firms leave a monopolistically competitive industry when

Accepted Answer

A)   other firms enter.
B)   average total cost is greater than marginal revenue.
C)   price is equal to marginal cost.
D)   marginal revenue exceeds marginal cost.
E)   average total cost is greater than price.F) A) and B)
G) A) and C)

Question 8

Strategic behavior refers to

Accepted Answer

A)   the situation in which what is best for firm A depends on what firm B does, and what is best for firm B depends on what firm A does.
B)   the behavior of monopoly firms that must take into account the actions of competitors.
C)   the situation in which what is best for firm A depends on what firm A does, and what is best for firm B depends on what firm B does.
D)   the behavior of a firm attempting to increase its profits at the expense of competitors.
E)   the behavior of firms in monopolistic competition.F) None of the above
G) All of the above

Question 9

A monopolistically competitive firm has a downward-sloping demand curve because

Accepted Answer

A)   market demand is downward-sloping.
B)   it is a monopoly in a small segment of the market.
C)   there are so few firms producing in the market.
D)   competition is being eliminated in a monopolistic market.
E)   its product is differentiated from others.F) A) and C)
G) C) and E)

Question 10

Advertising may do any of the following except

Accepted Answer

A)   mislead consumers into thinking one product is better than another.
B)   inform consumers of how a product is different from others.
C)   persuade individuals to continue buying a product even when they do not need it.
D)   inform consumers of a product's existence.
E)   persuade people to try a product.F) D) and E)
G) None of the above

Question 11

When oligopolists compete in quantities, they are in

Accepted Answer

A)   collusion.
B)   perfect competition.
C)   cooperation.
D)   Cournot competition.
E)   Bertrand competition.F) B) and E)
G) A) and D) D

Question 12

Which of the following is the least likely example of a monopolistically competitive firm?

Accepted Answer

A)   A barbershop
B)   A restaurant
C)   An electric company
D)   A brewer
E)   A clothing storeF) C) and D)
G) A) and D) C

Question 13

A monopolistic competitor behaves like a monopoly in the short run.

Accepted Answer

A) True 
 B)False

Question 14

Oligopoly is a market in which a few sellers offer similar or identical products.

Accepted Answer

A) True 
 B)False

Question 15

Some economists say that advertising is wasteful because they believe that

Accepted Answer

A)   most advertising is deceiving and, therefore, the resources used to advertise are not used for productive purposes.
B)   efforts to persuade use resources, but persuasion is not a useful product.
C)   it takes advantage of gullible people.
D)   people who make commercials are already rich and do not need the money.
E)   it creates a perception of product differences when products are not really different at all.F) None of the above
G) All of the above

Question 16

Which of the following describes an industry in which there are a few interdependent firms?

Accepted Answer

A)   Monopoly
B)   Monopolistic competition
C)   Oligopoly
D)   Perfect competition
E)   A regulated industryF) A) and C)
G) All of the above

Question 17

Game theory is often used to explain decision-making in

Accepted Answer

A)   monopolistic competition.
B)   oligopoly.
C)   all the market structures except competition.
D)   competition.
E)   monopoly.F) A) and B)
G) C) and D)

Question 18

A monopolistically competitive firm can increase its price without losing all its market share because of product differentiation.

Accepted Answer

A) True 
 B)False  True

Question 19

To say that game theory assumes people make purposeful choices with limited resources implies that players in a game seek to

Accepted Answer

A)   maximize their payoffs.
B)   stop the game.
C)   maximize their total revenue.
D)   defeat their opponents.
E)   cooperate with other players.F) C) and D)
G) A) and E)

Question 20

A profit-maximizing firm will differentiate its products only if doing so incurs no additional costs.

Accepted Answer

A) True 
 B)False

Exam 11: Product Differentiation, Monopolistic Competition, and Oligopoly

Which of the following phenomena is not explained by the existence of product differentiation?

Correct AnswerverifiedShow Answer

Exhibit 11-2 -Refer to Exhibit 11-2 for a profit-maximizing firm in a monopolistically competitive market. In the long run, the firm

Correct AnswerverifiedShow Answer

There is limited entry in a monopolistically competitive industry.

Correct AnswerverifiedShow Answer

Compared with a monopoly, long-run equilibrium in a monopolistically competitive industry results in

Correct AnswerverifiedShow Answer

Product differentiation exists when producers perceive the products to be different.

Correct AnswerverifiedShow Answer

Strategic behavior occurs in monopolistic competition.

Correct AnswerverifiedShow Answer

Firms leave a monopolistically competitive industry when

Correct AnswerverifiedShow Answer

Strategic behavior refers to

Correct AnswerverifiedShow Answer

A monopolistically competitive firm has a downward-sloping demand curve because

Correct AnswerverifiedShow Answer

Advertising may do any of the following except

Correct AnswerverifiedShow Answer

When oligopolists compete in quantities, they are in

Correct AnswerverifiedD

Which of the following is the least likely example of a monopolistically competitive firm?

Correct AnswerverifiedC

A monopolistic competitor behaves like a monopoly in the short run.

Correct AnswerverifiedShow Answer

Oligopoly is a market in which a few sellers offer similar or identical products.

Correct AnswerverifiedShow Answer

Some economists say that advertising is wasteful because they believe that

Correct AnswerverifiedShow Answer

Which of the following describes an industry in which there are a few interdependent firms?

Correct AnswerverifiedShow Answer

Game theory is often used to explain decision-making in

Correct AnswerverifiedShow Answer

A monopolistically competitive firm can increase its price without losing all its market share because of product differentiation.

Correct AnswerverifiedTrue

To say that game theory assumes people make purposeful choices with limited resources implies that players in a game seek to

Correct AnswerverifiedShow Answer

A profit-maximizing firm will differentiate its products only if doing so incurs no additional costs.

Correct AnswerverifiedShow Answer

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D

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C

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True

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