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The study of how people (or firms) behave in strategic situations is called:

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1)The study of how people (or firms) behave in strategic situations is called;Answer;recursive analysis.;cost-benefit analysis.;game theory.;normative economics.;2) The term oligopoly indicates;Answer;an industry whose four-firm concentration ratio is low.;many producers of a differentiated product.;a few firms producing either a differentiated or a homogeneous product.;a one-firm industry.;3) If the firms in an oligopolistic industry can establish an effective cartel, the resulting output;and price will approximate those of;Answer;a monopolistically competitive producer.;a pure monopoly.;a purely competitive producer.;an industry with a low four-firm concentration ratio.;4) If competing oligopolists completely ignore oligopolist X's price changes, then X's;Answer;demand curve will be less elastic than if the other oligopolists matched X's price changes.;demand and marginal revenue curves will coincide.;demand curve will be more elastic than if the other oligopolists matched X's price changes.;marginal revenue curve will have a vertical gap.;5) Refer to the above diagram where the numerical data show profits in millions of dollars.;Beta's profits are shown in the northeast corner and Alpha's profits in the southwest corner of;each cell. If Alpha and Beta agree to a high-price policy through collusion, the temptation to;cheat on that agreement is demonstrated by the fact that;Answer;Beta can increase its profit by lowering its price.;Both Alpha and Beta can earn even more profits if both agree to a low-price policy.;Beta can increase its profit by increasing its price still further.;Alpha can increase its profit by reducing its production costs.;6) Oligopolistic firms engage in collusion to;Answer;minimize unit costs of production.;increase production.;realize allocative efficiency, that is, the P = MC level of output.;earn greater profits.;7);Refer to the above diagram where the numerical data show profits in millions of dollars. Beta's;profits are shown in the northeast corner and Alpha's profits in the southwest corner of each cell.;If both firms follow a high-price policy;Answer;Beta will realize a $10 million profit and Alpha a $30 million profit.;each will realize a $15 million profit.;Alpha will realize a $10 million profit and Beta a $30 million profit.;each will realize a $20 million profit.;8);The above matrix best illustrates;Answer;game theory.;product differentiation.;the principal-agent problem.;price discrimination.;9) An industry having a four-firm concentration ratio of 85 percent;Answer;is monopolistically competitive.;approximates pure competition.;is an oligopoly.;is a pure monopoly.;10) If the four-firm concentration ratio for industry X is 80;Answer;the four largest firms account for 80 percent of total sales.;the four largest firms account for 20 percent of total sales.;each of the four largest firms accounts for 20 percent of total sales.;the industry is monopolistically competitive.;11);The mutual interdependence that characterizes oligopoly arises because;Answer;a small number of firms produce a large proportion of industry output.;the demand curves of firms are kinked at the prevailing price.;the products of various firms are homogeneous.;the products of various firms are differentiated.;12) Game theory;Answer;reveals that price-fixing among firms reduces profits.;reveals that mergers between rival firms are self-defeating.;is best suited for analyzing purely competitive markets.;is the analysis of how people (or firms) behave in strategic situations.;13);One would expect that collusion among oligopolistic;producers would be easiest to achieve in which of the;following cases?;Answer;a rather large number of firms producing a differentiated product;a rather large number of firms producing a homogeneous product;a very small number of firms producing a homogeneous product;a very small number of firms producing a differentiated product;14);Monopolistic competition and oligopoly are alike in that;Answer;the kinked-demand analysis is applicable in both instances.;strong mutual interdependence exists among firms in both market models.;nonprice competition is common to both.;the number of firms is approximately the same in both cases.;15);Refer to the above game theory matrix where the numerical data show the profits resulting from alternative;combinations of advertising strategies for Ajax and Acme. Ajax's profits are shown in the upper right part of;each cell, Acme's profits are shown in the lower left. Without collusion, the outcome of the game is cell;Answer;B.;A.;C.;16);In comparing the demand curve of a pure monopolist;with that of a monopolistically competitive firm, we;would expect the monopolistic competitor to have a;Answer;perfectly elastic demand curve and the monopolist to have a perfec;demand curve whose elasticity coefficient is 1 at all possible prices;generally more elastic demand curve.;generally less elastic demand curve.;17);Monopolistic competition means;Answer;a few firms producing a standardized or homogeneous product.;a large number of firms producing a standardized or homogeneous product.;a market situation where competition is based entirely on product differentiation and advertising.;many firms producing differentiated products.;18);In the short-run, a profit-maximizing monopolistically;competitive firm sets it price;Answer;above marginal cost.;equal to marginal revenue.;equal to marginal cost.;below marginal cost.;19);If all monopolistically competitive firms in the industry have profit circumstances similar to the firm shown;above;Answer;new firms will enter the industry.;some firms will exit the industry.;no firms will exit the industry.;all firms will exit the industry.;1.54 points;20);In the long-run, economic theory predicts that a monopolistically competitive firm will;Answer;have excess production capacity.;realize all economies of scale.;earn an economic profit.;equate price and marginal cost.;21);A monopolistically competitive industry combines elements of both competition;and monopoly. The monopoly element results from;Answer;mutual interdependence in decision making.;product differentiation.;high entry barriers.;the likelihood of collusion.;22);A monopolistically competitive firm's marginal revenue curve;Answer;does not exist because the firm is a "price maker.;is downsloping and lies below the demand curve.;coincides with the demand curve and is parallel to the horizontal axis.;is downsloping and coincides with the demand curve.;23);A significant difference between a monopolistically competitive firm and a purely competitive firm is that the;Answer;former's demand curve is perfectly inelastic.;former sells similar, although not identical, products.;former does not seek to maximize profits.;latter recognizes that price must be reduced to sell more outpu;24);The larger the number of firms and the smaller the degree of product differentiation the;Answer;greater the divergence between the demand and the marginal revenue curves of the monopolistically;competitive firm.;less elastic is the monopolistically competitive firm's demand curve.;larger will be the monopolistically competitive firm's fixed costs.;more elastic is the monopolistically competitive firm's demand curve.;25);Other things equal, if more firms enter a monopolistically competitive industry;Answer;the demand curves facing existing;firms would shift to the right.;the demand curves facing existing;firms would become less elastic.;the demand curves facing existing;firms would shift to the left.;Losse);27);Monopolistic competition resembles pure competition;because;Answer;in both instances firms will operate at the minimum point on their lo;both industries entail the production of differentiated products.;barriers to entry are either weak or nonexistent.;both industries emphasize nonprice competition;28);When a monopolistically competitive firm is in long-run;equilibrium;Answer;production takes place where ATC is minimized.;normal profit is zero and price equals marginal cost.;economic profit is zero and price equals marginal cost.;marginal revenue equals marginal cost and price equals average t;29);The demand curve of a monopolistically competitive producer is;Answer;less elastic than that of a pure monopolist, but more elastic than that of a pure competitor.;more elastic than that of either a pure monopolist or a pure competitor.;less elastic than that of either a pure monopolist or a pure competitor.;more elastic than that of a pure monopolist, but less elastic than that of a pure competitor;30);Excess capacity refers to the;Answer;amount by which actual production falls short of the minimum ATC output.;fact that most monopolistically competitive firms encounter diseconomies of scale.;fact that entry barriers artificially reduce the number of firms in an industry.;differential between price and marginal costs which characterizes monopolistically competitive firms.;31);Assume a purely competitive firm is maximizing profit at some output at which long-run average total cost is at;a minimum. Then;Answer;other firms will enter this industry.;there is no tendency for the firm's industry to expand or contract.;allocative but not productive efficiency is being achieved.;the firm is earning an economic profit.;32);If a purely competitive constant-cost industry is realizing economic profits, we can expect industry supply to;Answer;increase, output to decrease, price to decrease, and profits to decrease.;increase, output to increase, price to decrease, and profits to decrease.;decrease, output to decrease, price to increase, and profits to increase.;increase, output to increase, price to increase, and profits to decrease.;33);Assume that TFC = $5 and the firm cannot produce a fraction of a unit. At the profit-maximizing output the;firm's total revenue is;Answer;$64.;$37.;$80.;$48.;34);We would expect an industry to expand if firms in that;industry are;Answer;earning economic profits.;earning normal profits.;incurring economic losses.;earning accounting profits.;35);If a firm in a purely competitive industry is confronted with an equilibrium price of $5, its marginal revenue;Answer;will be less than $5.;may be either greater or less than $5.;will also be $5.;will be greater than $5.;36);Which of the following is characteristic of a purely competitive seller's demand curve?;Answer;It is the same as the market demand curve.;Price and marginal revenue are equal at all levels of output.;Average revenue is less than price.;Its elasticity coefficient is 1 at all levels of output.;37);Marginal revenue for a purely competitive firm;Answer;may be either greater or less than price.;is equal to price.;is less than price.;is greater than price;38);A competitive firm in the short run can determine the profit-maximizing (or loss-minimizing) output by equating;Answer;price and marginal revenue.;marginal revenue and marginal cost.;price and average fixed cost.;price and average total cost.;39);A purely competitive seller is;Answer;a "price maker.;neither a "price maker" nor a "price taker.;both a "price maker" and a "price taker.;a "price taker.;40);Which of the following is not a characteristic of pure competition?;Answer;no barriers to entry;a standardized product;price strategies by firms;41);Which of the following industries most closely approximates pure competition?;Answer;clothing;steel;agriculture;farm implements;42);For a purely competitive firm total revenue;Answer;is price times quantity sold.;increases by a constant absolute amount as output expands.;graphs as a straight upsloping line from the origin.;has all of these characteristics;43);Suppose you find that the price of your product is less than minimum AVC. You should;Answer;close down because, by producing, your losses will exceed your total fixed costs.;minimize your losses by producing where P = MC.;maximize your profits by producing where P = MC.;close down because total revenue exceeds total variable cost.;44);Refer to the above diagram for a purely competitive producer. If product price is P3;Answer;the firm will maximize profit at point d.;economic profits will be zero.;the firm will earn an economic profit.;new firms will enter this industry.;45);Marginal revenue is the;Answer;change in total revenue associated with the sale of one more unit of output.;change in average revenue associated with the sale of one more unit of output.;change in product price associated with the sale of one more unit of output.;difference between product price and average total cost.;46);Which of the following statements applies to a purely competitive producer?;Answer;Its product is slightly different from those of its competitors.;It will not advertise its product.;In long-run equilibrium it will earn an economic profit.;Its product will have a brand name.;47);Refer to the above short-run data. The shape of the total cost curve reflects;Answer;increasing and diminishing returns.;economies and diseconomies of scale.;the law of rising fixed costs.;diminishing opportunity costs.;48);Refer to the above diagram for a purely competitive producer. The firm's short-run supply curve is;Answer;the cd segment and above on the MC curve.;the bcd segment and above on the MC curve.;not shown.;the abcd segment and above on the MC curve.;49);If the firm's minimum average variable cost is $10 and it cannot produce a fraction of a unit, the firm's profitmaximizing level of output would be;Answer;4.;3.;5.;2.;50);Refer to the above short-run data. Total fixed cost for this firm is;Answer;$300.;about $67.;$100.;$200.;51);Pure monopoly means;Answer;a standardized product being produced by many firms.;any market in which the demand curve to the firm is downsloping.;a large number of firms producing a differentiated product.;a single firm producing a product for which there are no close substitutes.;52);Refer to the above data for a nondiscriminating;monopolist. This firm will maximize its profit by;producing;Answer;4 units.;3 units.;5 units.;6 units.;53);Refer to the above data for a nondiscriminating monopolist. At its profit-maximizing output, this firm's price will;exceed its marginal cost by ____ and its average total cost by ____.;Answer;$20, $27.33;$30, $20.50;$10, $10.40;$24, $27.33;54);Refer to the above diagram. If price is reduced from P1 to P2, total revenue will;Answer;decrease by C minus A.;increase by A minus C.;decrease by A minus C.;increase by C minus A;55);Refer to the above data for a nondiscriminating monopolist. At its profit-maximizing output, this firm's total profit;will be;Answer;zero.;$27.;$82.;$54;56) Price discrimination refers to;Answer;the difference between the prices a purely competitive seller and a purely monopolistic seller would;charge.;selling a given product for different prices at two different points in time.;the selling of a given product at different prices that do not reflect cost differences.;any price above that which is equal to a minimum average total cost.;57);Refer to the above diagram. Demand is relatively inelastic;Answer;at any price below P2.;at price P3.;in the P2P3 price range.;in the P2P4 price rang;58);A natural monopoly occurs when;Answer;economies of scale are obtained at relatively low levels of output.;long-run average costs rise continuously as output is increased.;long-run average costs decline continuously through the range of demand.;a firm owns or controls some resource essential to production.;59);Purely competitive firms and pure monopolists are similar in that;Answer;the demand curves of both are perfectly elastic.;significant entry barriers are common to both.;both are price makers.;both maximize profit where MR = MC.;60);If the above profit-maximizing monopolist is able to perfectly price discriminate, charging each customer the;price associated with each given level of output, how many units will the firm produce?;Answer;3;4;2;5;61);Refer to the above data. At its profit-maximizing output, this firm's total revenue will be;Answer;$300.;$180.;$280.;$198.;62);Which of the following statements is correct?;Answer;In seeking the profit-maximizing output the pure monopolist underallocates resources to its production.;The pure monopolist will maximize profit by producing at that point on the demand curve where elasticity;is zero.;Purely monopolistic sellers earn only normal profits in the long run.;The pure monopolist maximizes profits by producing that output at which the differential between price;and average cost is the greatest.;63);Refer to the above diagram. At the profit-maximizing level of output, total cost will be approximately;Answer;$300.;$600;$200;$500.;64);When a firm is on the inelastic segment of its demand curve, it can;Answer;increase profits by increasing price.;decrease total costs by decreasing price.;increase total revenue by more than the increase in total cost by increasing price.;increase total revenue by reducing price.;65);Which of the following is correct?;Answer;A purely competitive firm is a "price taker," while a monopolist is a "price maker.;Both purely competitive and monopolistic firms are "price takers.;Both purely competitive and monopolistic firms are "price makers.;A purely competitive firm is a "price maker," while a monopolist is a "price taker.

 

Paper#29830 | Written in 18-Jul-2015

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