Deck 15: Monopolistic Competition and Oligopoly

Question 1

When a market consists of a few large firms,it:

A)must be perfectly competitive.
B)is likely an oligopoly.
C)must be monopolistically competitive.
D)is likely a monopoly.

Answer 1

is likely an oligopoly.

Question 2

When a market consists of many small firms,it:

A)cannot be a monopoly.
B)must be a perfectly competitive market.
C)cannot be a monopolistically competitive market.
D)can only be an oligopoly.

Answer 2

cannot be a monopoly.

Question 3

Understanding the market structure is important for:

A)businesses.
B)consumers.
C)policy-makers.
D)All of these statements are true.

Answer 3

All of these statements are true.

Question 4

In practice,monopolistically competitive markets are:

A)very common.
B)very rare.
C)virtually nonexistent.
D)the only type of market that truly exists.

Question 5

The more firms are present in a market,the:

A)more competition is likely to be present.
B)less competition is likely to be present.
C)more like a monopoly it will behave.
D)more collusion is likely to occur.

Question 6

The good or service that firms in an oligopoly sell:

A)has no close substitutes.
B)has close substitutes.
C)is standardized.
D)can be either standardized or have close substitutes.

Question 7

Large barriers to entry exist in which of the following market structures?

A)Perfect competition only
B)Perfect competition and monopolistic competition
C)Oligopoly and monopoly
D)Monopoly only

Question 8

In practice,oligopolistic markets are:

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

Question 9

It is important to understand the market structure you are operating in because:

A)that defines how much freedom you have to set prices.
B)it will tell you how much attention to pay to your competitor's behavior.
C)it is key to running a successful business.
D)All of these statements are true.

Question 10

One of the defining characteristics of an oligopoly is that:

A)one firm's behavior can affect the others' profits.
B)all firms act in unison to create a perfectly competitive outcome.
C)all firms act in unison to create a monopoly outcome.
D)None of these statements is true.

Question 11

A market with many firms that sell goods and services that are close substitutes for one another is called:

A)perfect competition.
B)monopolistic competition.
C)oligopoly.
D)monopoly.

Question 12

Strategic behavior is key in defining which market structure?

A)Monopoly
B)Oligopoly
C)Monopolistic competition
D)Perfect competition

Question 13

The fewer the number of firms present in a market,the:

A)more competition is likely to be present.
B)less likely barriers to entry are present.
C)more likely market power will exist.
D)less like a monopoly it will behave.

Question 14

One of the defining characteristics of an oligopoly is that:

A)strategic interactions between a firm and its rivals have a major impact on its success.
B)the quantity set by an individual firm affects the others' profits.
C)the price set by an individual firm affects the others' profits.
D)All of these statements are true.

Question 15

Monopolistic competition describes a market with:

A)many firms that sell goods and services that are similar,but slightly different.
B)few firms that sell goods and services that are similar,but slightly different.
C)many firms that sell goods and services that are standardized.
D)few firms that sell goods and services that are standardized.

Question 16

Understanding the market structure you are operating in defines:

A)the price you should set.
B)what quantity to produce.
C)how much your competitor's behavior will affect you.
D)how advertising will be interpreted by consumers.

Question 17

A market that consists of only a few large firms is probably a:

A)monopoly.
B)perfectly competitive market.
C)monopolistically competitive market.
D)oligopoly.

Question 18

The two types of market structures that are imperfectly competitive are:

A)perfect competition and monopolistic competition.
B)monopolistic competition and oligopoly.
C)oligopoly and monopoly.
D)monopoly and perfect competition.

Question 19

Which of the following market structures is considered imperfectly competitive?

A)Perfect competition
B)Monopolistic competition
C)Monopoly
D)All of these are considered imperfectly competitive.

Question 20

Oligopoly describes a market with:

A)only a few sellers.
B)many sellers.
C)one seller.
D)few or many sellers,but only one buyer.

Question 21

For the monopolistically competitive firm,the demand curve it faces will be steeper the:

A)more easily the good can be substituted.
B)less easily the good can be substituted.
C)more complement goods are available.
D)less complement goods are available.

Question 22

For the monopolistically competitive firm,the steepness of the demand curve depends on:

A)the availability of close substitutes.
B)the steepness of the MC curve.
C)the number of consumers in the market.
D)None of these statements is correct.

Question 23

Oligopoly describes the ____________ and monopolistic competition describes the ______________.

A)number of firms;variety of products
B)variety of products;barriers to entry
C)barriers to entry;number of firms
D)variety of products;number of firms

Question 24

These are the cost and revenue curves associated with a monopolistically competitive firm.
According to the graph shown,area A represents:

A)profits earned in the short run.
B)profits earned in the short and long run.
C)profits earned in the long run.
D)consumer surplus.

Question 25

Product differentiation refers to:

A)firms who offer similar products to their competitors' products,but that are more attractive in some way.
B)the process of creating a standardized product with a lower-cost method than the competitors' method.
C)the process of informing the public of differences in products as a result of error.
D)consumers who sort and group goods based on similar characteristics.

Question 26

These are the cost and revenue curves associated with a monopolistically competitive firm.
According to the graph shown,area C represents:

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

Question 27

Just like a monopolist,a monopolistically competitive firm:

A)cannot sell more without dropping the price.
B)is a price taker.
C)sets the price according to marginal revenue and marginal cost;the demand curve doesn't matter.
D)faces a perfectly elastic demand curve.

Question 28

Firms who effectively differentiate their product from their competitors' products do so by having:

A)real,not just perceived,differences in product design.
B)perceived,but not real,differences in product design.
C)real or perceived differences in product design.
D)None of these statements is true.

Question 29

________________ and ______________ are often found together in a market.

A)Monopolistic competition;oligopoly
B)Perfect competition;oligopoly
C)Monopoly;oligopoly
D)Monopolistic competition;monopoly

Question 30

These are the cost and revenue curves associated with a monopolistically competitive firm.
According to the graph shown,the monopolistically competitive firm will produce:

A)where MR = MC and will charge according to ATC.
B)where MR = MC and will charge according to D.
C)where D = MC and will charge according to MR.
D)where D = MC and will charge according to ATC.

Question 31

These are the cost and revenue curves associated with a monopolistically competitive firm.
According to the graph shown,the monopolistically competitive firm will produce Q1 and charge:

A)P3 in the short run,and enjoy profits.
B)P2 in the long run,and earn zero profits.
C)P3 in the long run,and earn zero profits.
D)P2 in the short run,and enjoy profits.

Question 32

Standardized products can appear:

A)only in perfectly competitive markets.
B)in perfectly competitive and monopolistically competitive markets.
C)in monopolistically competitive and oligopoly markets.
D)in perfectly competitive and oligopoly markets.

Question 33

Long-run economic profits are possible in which of the following market structures?

A)Monopolistic competition
B)Oligopoly
C)Perfect competition
D)Long-run profits are possible in all of these market structures.

Question 34

Like the monopolist,the monopolistically competitive firm:

A)faces a downward sloping demand curve.
B)is a price taker.
C)sets the price where marginal cost equals marginal revenue;the demand curve doesn't matter.
D)All of these statements are true.

Question 35

In the short run,monopolistically competitive firms behave like ________________,but in the long run,the outcome is similar to that of the ________________.

A)monopolies;perfectly competitive firm
B)perfectly competitive firm;monopoly
C)monopoly;oligopoly
D)oligopoly;perfectly competitive firm

Question 36

In the short run,product differentiation enables firms in monopolistically competitive markets to:

A)produce a good for which there are no exact substitutes.
B)standardize goods.
C)collude.
D)act like perfectly competitive firms.

Question 37

___________________ is about the number of firms,and ________________ is about the variety of products.

A)Monopolistic competition;oligopoly
B)Oligopoly;monopolistic competition
C)Perfect competition;monopoly
D)Monopoly;oligopoly

Question 38

Offering goods that are similar to competitors' products but more attractive in some ways is called:

A)product distinction.
B)product differentiation.
C)price-point pinning.
D)deceptive advertising.

Question 39

In the short run,product differentiation enables firms in monopolistically competitive markets to:

A)produce a good for which there are exact substitutes.
B)produce a good for which there are no close substitutes.
C)act like price takers.
D)act like monopolists.

Question 40

These are the cost and revenue curves associated with a monopolistically competitive firm.
According to the graph shown,area B represents:

A)profits earned in the short run.
B)consumer surplus.
C)producer surplus.
D)deadweight loss.

Question 41

If a monopolistically competitive firm's demand curve is shifting left,it will stop shifting when:

A)the price is equal to the firm's marginal cost.
B)the price is equal to the firm's average total cost.
C)the price is the same as what a perfectly competitive firm's price would be.
D)there is no deadweight loss.

Question 42

For the monopolistically competitive firm,the demand curve it faces will be flatter:

A)the more differentiated the good is.
B)the less differentiated the good is.
C)the more complementary the good is.
D)the less complementary the good is.

Question 43

As long as firms currently in a monopolistically competitive market are earning profits:

A)more firms will enter the market with products that are close substitutes.
B)more firms will leave the market before the profits are competed away.
C)the government will step in to regulate prices to ensure they stay competitive.
D)there must be large barriers to entry.

Question 44

If firms in a monopolistically competitive market are earning negative economic profits,the demand curve of a single firm will likely:

A)shift right,as other firms leave the industry.
B)shift left,as other firms leave the industry.
C)shift right,as other firms enter the industry.
D)shift left,as other firms enter the industry.

Question 45

If a firm in a monopolistically competitive market has a demand curve shifting to the right,it could be that:

A)negative economic profits are being earned.
B)firms are leaving the market.
C)the selling price is less than the average total cost of the firm.
D)All of these statements are true.

Question 46

Firms have incentive to enter a monopolistically competitive market if:

A)positive profits are being earned and they can create a similar product.
B)positive profits are being earned and the price is below MC.
C)zero profits are being made and they can duplicate the product exactly.
D)zero profits are being made and they can create a similar product.

Question 47

Once a monopolistically competitive firm innovates,it is likely that:

A)other firms will rush to create similar,highly substitutable goods.
B)it will enjoy long-run profits.
C)it will need government protection to earn enough to cover its R & D costs.
D)None of these is likely to happen.

Question 48

The demand curve facing the monopolistically competitive firm is:

A)steeper than that of its competition.
B)steeper than that of a monopolist.
C)flatter than that of a perfectly competitive firm.
D)None of these statements is true.

Question 49

If a monopolistically competitive firm's demand curve is shifting left,it will stop shifting only when:

A)firms stop leaving the industry.
B)firms stop entering the industry.
C)the firm raises its price.
D)the firm lowers its price.

Question 50

If a monopolistically competitive firm is earning profits in the short run:

A)other firms have an incentive to enter the market.
B)barriers to entry will allow the firm to enjoy them in the long run as well.
C)it is acting like a perfectly competitive firm.
D)it should leave the industry before it gets competed away.

Question 51

If a monopolistically competitive firm is earning profits in the short run:

A)the entry of competing firms will shift the firm's demand to the right.
B)the entry of competing firms will shift the firm's demand to the left.
C)the entry of competing firms will cause price to drop,but not affect the firm's demand curve.
D)the entry of competing firms will cause price to rise,but not affect the firm's demand curve.

Question 52

A large difference between a monopolistically competitive firm and a monopoly is:

A)the ability for competition to enter the market in the long run.
B)the ability for competition to enter the market in the short run.
C)only the monopolistically competitive firm is a price taker.
D)only the monopolist can set his price equal to demand.

Question 53

If a monopolistically competitive firm is suffering losses in the short run:

A)the exit of competing firms will shift the firm's demand to the right.
B)the exit of competing firms will shift the firm's demand to the left.
C)the exit of competing firms will cause price to drop,but not affect the firm's demand curve.
D)the exit of competing firms will cause price to rise,but not affect the firm's demand curve.

Question 54

In the short run,monopolistically competitive firms can maximize profits by:

A)acting like a monopolist.
B)acting like a perfectly competitive firm.
C)playing strategic games like an oligopolist.
D)None of these statements is true.

Question 55

If a monopolistically competitive firm has a demand curve that is shifting left,it must be true that:

A)it is currently earning positive economic profits.
B)firms are entering the market.
C)the selling price of the good is decreasing.
D)All of these statements are true.

Question 56

The demand curve facing the monopolistically competitive firm is:

A)steeper than that of their competition.
B)flatter than that of a monopolist.
C)steeper than that of a monopolist.
D)flatter than that of a perfectly competitive firm.

Question 57

If firms in a monopolistically competitive market are earning negative economic profits,it is likely that:

A)firms will enter the market.
B)firms will exit the market.
C)the firms in the market will shut down immediately.
D)the firms in the market will expand to try to capture lower costs per unit.

Question 58

In the short run,monopolistically competitive firms:

A)can earn positive economic profits by acting like a monopolist.
B)can earn positive economic profits by acting like a perfectly competitive firm.
C)will earn zero economic profits by acting like a monopolist.
D)will earn zero economic profits by acting like a perfectly competitive firm.

Question 59

If a monopolistically competitive firm's demand curve is shifting left,it will stop shifting when:

A)firms have no incentive to enter the market.
B)the price is equal to the firm's average total cost.
C)the firm is earning zero economic profit.
D)All of these statements are true.

Question 60

If a firm's demand curve in a monopolistically competitive market is shifting left:

A)competition is likely entering with similar products.
B)firms must be exiting the industry.
C)positive economic profits must be getting bigger.
D)None of these statements is true.

Question 61

These are the cost and revenue curves associated with a firm.
Assuming the firm in the graph shown is producing Q1 and charging P3,it is likely showing the cost and revenue curves of a monopolistically competitive firm that is:

A)maximizing profits.
B)earning zero profits.
C)in long-run equilibrium.
D)All of these statements are true.

Question 62

If a firm in a monopolistically competitive market has a demand curve shifting to the right,it is likely that:

A)positive economic profits are being earned.
B)firms are entering the market.
C)the selling price is less than the average total cost of the firm.
D)All of these statements are true.

Question 63

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

A)the firm is earning zero economic profits.
B)the firm's price is equal to its average total costs.
C)other firms have no incentive to leave the market.
D)All of these statements are true.

Question 64

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

A)the firm's demand curve to shift left and/or right.
B)the firm's supply curve to shift left and/or right.
C)the firm's average total cost curve to shift left and/or right.
D)the firm's marginal cost curve to shift straight up and/or down.

Question 65

These are the cost and revenue curves associated with a firm.
Assuming the firm in the graph shown is producing Q1 and charging P3,it is likely showing the cost and revenue curves of a monopolistically competitive firm that is:

A)earning positive profits.
B)earning negative profits.
C)earning zero profits.
D)It is impossible to tell from the graph provided.

Question 66

These are the cost and revenue curves associated with a firm.
Assuming the firm in the graph is producing Q1 and charging P3,it is likely:

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

Question 67

In the long run,firms in a monopolistically competitive market operate at:

A)an efficient scale.
B)a less-than-efficient scale.
C)a more-than-efficient scale.
D)Any of these could be true,depending on the individual firm.

Question 68

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

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

Question 69

These are the cost and revenue curves associated with a firm.
If the firm in the given graph were to maximize profits,it would:

A)produce Q1 and charge P3.
B)cause deadweight loss.
C)earn zero economic profits.
D)All of these statements are true.

Question 70

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

A)the firm raises its price.
B)the firm lowers its price.
C)firms stop entering the market.
D)firms stop leaving the market.

Question 71

These are the cost and revenue curves associated with a firm.
If the firm in the given graph were to produce Q1 and charge P3,the area A would represent:

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

Question 72

These are the cost and revenue curves associated with a firm.
Assuming the firm in the graph is producing Q1 and charging P3,it is likely showing the cost and revenue curves of a firm in:

A)the short run,and firms will enter this market.
B)the long run,and firms will enter this market.
C)the short run,and firms will leave this market.
D)the long run,and no firms will enter or exit.

Question 73

These are the cost and revenue curves associated with a firm.
If the firm in the given graph were to produce Q1 and charge P3,the area B would represent:

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

Question 74

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

A)profits are positive.
B)profits are negative.
C)profits are zero.
D)Any of these statements could be true.

Question 75

These are the cost and revenue curves associated with a firm.
According to the graph,this firm could maximize profits by producing _______ and charging ____.

A)Q1;P2
B)Q1;P3
C)Q2;P2
D)Q1;P1

Question 76

These are the cost and revenue curves associated with a firm.
If the firm in the given graph were to produce Q1 and charge P3,the area C would represent:

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

Question 77

These are the cost and revenue curves associated with a firm.
If the firm in the graph were producing Q2 and charging P2,it:

A)represents the perfectly competitive outcome.
B)is an efficient outcome.
C)is an outcome that eliminates deadweight loss.
D)All of these statements are true.

Question 78

These are the cost and revenue curves associated with a firm.
Assuming the firm in the graph shown is producing Q1 and charging P3 in the long run,it is likely showing the cost and revenue curves of a firm in which type of market?

A)Perfect competition
B)Monopolistic competition
C)Oligopoly
D)Any market structure could be represented here

Question 79

In the long run,firms in a monopolistically competitive market operate:

A)at less than capacity.
B)at lowest average total costs possible.
C)at capacity.
D)on an efficient scale.

Question 80

These are the cost and revenue curves associated with a firm.
Assuming the firm in the graph is producing Q1 and charging P3,it is likely showing the cost and revenue curves of a firm in:

A)the long run,and economic profits are zero.
B)the short run,and accounting profits are negative.
C)the long run,and accounting profits are zero.
D)the short run,and economic profits are positive.