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RECO 100 Society and the Value of Nature;Chapter 11 Problem set;1. Which is a characteristic of monopolistic competition?;A. Standardized product;B. A relatively small number of firms;C. Absence of nonprice competition;D. Relatively easy entry;2. A major characteristic of monopolistic competition is;A. Mutual interdependence;B. A high degree of collusion among firms;C. A relatively large number of firms selling the product;D. Relatively easy entry into an industry, but a relatively difficult exit from the industry;3. Which is not a form of product differentiation for the monopolistically competitive;firm?;A. Brand names and trademarks;B. Promotion and packaging;C. Location and accessibility;D. Standard hours and procedures;4. A monopolistically competitive industry is like a purely competitive industry in that;A. Each industry produces a standardized product;B. Nonprice competition is a feature in both industries;C. Neither industry has significant barriers to entry;D. Firms in both industries face a horizontal demand curve;5. Which assumption is part of the model of monopolistic competition?;A. Firms make identical products;B. There is no collusion among firms;C. There are significant barriers to entry into the market;D. There are few buyers and sellers;6. Monopolistic competition is characterized by firms;A. Producing differentiated products;B. Making economic profits in the long run;C. Producing at optimal productive efficiency;D. Producing where price equals marginal cost;7. Which would be characteristic of monopolistic competition?;A. A potential for price fixing through collusion;B. Relatively small market share for each firm;C. Mutual interdependence among the few firms;D. Product standardization;8. In which industry is monopolistic competition most likely to be found?;A. Utilities;B. Agriculture;C. Retail trade;D. Mining;17. In a monopolisitically competitive industry, the four-firm concentration ratio would;be;A. High, and the Herfindahl index would be high;B. High, and the Herfindahl index would be low;C. Low, and the Herfindahl index would be high;D. Low, and the Herfindahl index would be low;18. The following are the respective numbers for the four-firm concentration ratio and;Herfindahl index in an industry. Which set of numbers would indicate that the industry;was monopolistically competitive?;A. 25 and 207;B. 76 and 2662;C. 77 and 1807;D. 89 and 2582;19. Refer to the above graph. A successful advertising campaign by a monopolistically;competitive firm will cause the demand curve to shift from;A. A to B and become more elastic;B. A to B and become less elastic;C. B to A and become more elastic;D. B to A and become less elastic;20. Refer to the above graph. A monopolistically competitive firm was initially;successful, but then its rivals started an advertising campaign that undercut its market;position. This situation would cause the demand curve for the monopolistically;competitive firm to shift from;A. A to B and become more elastic;B. A to B and become less elastic;C. B to A and become more elastic;D. B to A and become less elastic;28. A major difference between pure competition and monopolistic competition is that;under pure competition;A. Individual firms have more elastic demand curves;B. The market demand curve is less elastic;C. There is a smaller number of producers;D. There are barriers to entry;The graph depicts a monopolistically competitive firm;32. Refer to the above graph. In the short run, this monopolistically competitive firm will;set price at;A. $65 and produce 45 units of output;B. $65 and produce 35 units of output;C. $50 and produce 35 units of output;D. $50 and produce 50 units of output;33. Refer to the above graph. At the profit-maximizing level of short-run output, this;monopolistically competitive firm will be making a profit of;A. $275;B. $350;C. $500;D. $525;34. Refer to the above graph. This monopolistically competitive firm is;A. Making economic profit in the long run;B. Making economic profit in the short run;C. Earning only normal profit in the long run;D. Earning only normal profit in the short run;40. In monopolistic competition, a firm has a limited degree of "price-making" ability.;This means that the firm will;A. Always earn an economic profit;B. Set price equal to marginal cost;C. Set price above marginal cost;D. Produce at minimum average total cost;41. Assume that in a monopolistically competitive industry, firms are earning economic;profit. This situation will;A. Reduce the excess capacity in the industry as firms expand production;B. Attract other firms to enter the industry because the barriers to entry are low;C. Cause firms to standardize their product to limit the degree of competition;D. Make the industry allocatively efficient as each firm seeks to maintain its profits;42. If monopolistically competitive firms in an industry are making an economic profit;then;A. New firms will enter the industry and product demand will increase for the existing;firms;B. Firms will exit the industry and product demand will decrease for the firms that remain;C. Firms will exit the industry and product demand will increase for the firms that remain;D. New firms will enter the industry and product demand will decrease for the existing;firms;43. The marginal cost curve intersects the average total cost curve in monopolistic;competition;A. At the market price;B. At the minimum average total cost;C. To the left of the minimum average total cost;D. To the right of the minimum average total cost;44. Refer to the above graph of a representative firm in monopolistic competition. What;does line 1 represent?;A. Demand;B. Marginal cost;C. Marginal revenue;D. Average total cost;45. Refer to the above graph of a representative firm in monopolistic competition. What;does line 2 represent?;A. Demand;B. Marginal cost;C. Marginal revenue;D. Average total cost;46. Refer to the above graph of a representative firm in monopolistic competition. What;does line 3 represent?;A. Demand;B. Marginal cost;C. Marginal revenue;D. Average total cost;47. Refer to the above graph of a representative firm in monopolistic competition. What;does line 4 represent?;A. Demand;B. Marginal cost;C. Marginal revenue;D. Average total cost;57. In the long run, a representative firm in a monopolistically competitive industry will;typically;A. Have an elasticity of demand that will be less than it was in the short run;B. Have a larger number of competitors than it will in the short run;C. Produce a level of output at which marginal cost and price are equal;D. Earn a normal profit, but not an economic profit;58. Were a monopolistically competitive industry in long-run equilibrium, a firm in that;industry might be able to increase its economic profits by;A. Decreasing the price of its product;B. Increasing the price of its product;C. Increasing the demand for its product;D. Decreasing the production of its product;63. Refer to the above graphs. A short-run equilibrium that would produce profits for a;monopolistically competitive firm would be represented by graph;A. A;B. B;C. C;D. D;64. Refer to the above graphs. A short-run equilibrium that would produce losses for a;monopolistically competitive firm would be represented by graph;A. A;B. B;C. C;D. D;65. Refer to the above graphs. The long-run equilibrium for a monopolistically;competitive firm is represented by graph;A. A;B. B;C. C;D. D;66. Refer to the above graphs. Which graph would not be a possible depiction of shortrun or long-run outcomes for a monopolistically competitive firm?;A. A;B. B;C. C;D. D;80. Monopolistic competition is characterized by excess capacity because;A. Firms are always profitable in the long run;B. Firms charge a price that is less than marginal cost;C. Firms produce at an output level less than the least-cost output;D. The demand for a product is perfectly elastic in this type of industry;81. In monopolistic competition there is an underallocation of resources at the profitmaximizing level of output, which means that;A. Minimum ATC is less than MC;B. Minimum ATC is less than MR;C. Price is greater than minimum ATC;D. Price is greater than MC;82. Refer to the above graph of the representative firm in monopolistic competition.;Excess capacity for this firm would be illustrated by;A. D - 0;B. E - C;C. E - D;D. D - C;83. Refer to the above graph of the representative firm in monopolistic competition. The;long-run equilibrium price and output for this firm will be;A. A and C;B. B and D;C. A and D;D. B and C;96. Refer to the above graph. Assume that in long-run equilibrium a purely competitive;firm has the same cost curves as that of the monopolistically competitive firm shown. It;can be concluded that the;A. Purely competitive firm would have lower profits;B. Purely competitive firm would have higher profits;C. Purely competitive producer would produce less at a higher ATC;D. Monopolistically competitive producer would produce less at a higher ATC;97. Refer to the above graph. This monopolistically competitive firm is;A. Suffering an economic loss;B. Earning an economic profit;C. Allocatively and productively efficient;D. Neither allocatively nor productively efficient;98. Which statement concerning monopolistic competition is false?;A. Long-run equilibrium under monopolistic competition is achieved where economic;profits are zero;B. Monopolistic competition is likely to result in a greater variety of product brands than;pure competition;C. The monopolistic competitive demand curve is more elastic than the demand curve;facing a monopolistic firm;D. Monopolistic competition does not lead to any economic inefficiency, since firms in;this industry cannot sustain economic profits;112. Which is a likely characteristic of a differentiated oligopolistic market?;A. There are minimal barriers to entry;B. The market demand curve is inelastic;C. There is minimal advertising expenditure;D. Price and output decisions of firms are interdependent;113. A major distinction between a monopolistically competitive firm and an;oligopolistic firm is that;A. One is a price taker and the other is a price maker;B. A recognized interdependence exists between firms in one industry but not in the other;C. One always produces differentiated products and the other always produces a;homogeneous product;D. One necessarily faces a downward-sloping demand curve and the other a horizontal;demand curve;119. The primary copper industry in the United States would be an example of a;A. Duopoly;B. Noncollusive oligopoly;C. Homogeneous oligopoly;D. Differentiated oligopoly;120. Which cannot be a characteristic of an oligopolistic industry?;A. Differentiated products;B. A large number of consumers;C. Significant barriers to entry;D. A perfectly elastic firm demand curve;121. Which statement about oligopoly is false?;A. Oligopolistic firms recognize their interdependence;B. Prices in oligopoly are predicted to fluctuate widely and frequently;C. A few firms play an important role in the sale of an identical or differentiated product;D. There is no single predicted pattern of action and reaction for oligopolists, because one;firm's behavior is a function of what its rivals do;127. In an oligopolistic industry, the four-firm concentration ratio would be;A. High, and the Herfindahl index would be high;B. High, and the Herfindahl index would be low;C. Low, and the Herfindahl index would be high;D. Low, and the Herfindahl index would be low;135. The Herfindahl index for an industry is 2550. Which of the following sets of market;shares and industry with four firms would produce such an index?;A. 20, 20, 30, and 30;B. 25, 25, 25, and 25;C. 20, 25, 25, and 30;D. 10, 20, 30, and 40;136. The Herfindahl index for an industry is 2750. Which of the following sets of market;shares and industry with four firms would produce such an index?;A. 10, 30, 30, and 30;B. 15, 25, 25, and 35;C. 5, 25, 30, and 40;D. 15, 20, 30, and 35;Answer the next question(s) based on the following payoff matrix for a duopoly in which;the numbers indicate the profit in millions of dollars for a high-price or a low-price;strategy;146. Refer to the above payoff matrix. If both firms collude to maximize joint profits, the;total profits for the two firms will be;A. $350 million;B. $400 million;C. $500 million;D. $525 million;147. Refer to the above payoff matrix. Assume that firm B adopts a low-price strategy;while firm A maintains a high-price strategy. Compared to the results from a high-price;strategy for both firms, firm B will now;A. Lose $75 million in profit and firm A will gain $50 million in profit;B. Gain $50 million in profit and firm A will lose $50 million in profit;C. Gain $75 million in profit and firm A will lose $50 million in profit;D. Gain $50 million in profit and firm A will lose $75 million in profit;148. Refer to the above payoff matrix. If both firms operate independently and do not;collude, the most likely profit is;A. $175 million for firm A and $175 million for firm B;B. $250 million for firm A and $250 million for firm B;C. $200 million for firm A and $325 million for firm B;D. $325 million for firm A and $200 million for firm B;Answer the next question(s) based on the following payoff matrix for a duopoly in which;the numbers indicate the profit in thousands of dollars for a high-price or a low-price;strategy;149. Refer to the above payoff matrix. If both firms collude to maximize joint profits, the;total profits for the two firms will be;A. $1,200,000;B. $1,250,000;C. $1,400,000;D. $1,500,000;150. Refer to the above payoff matrix. Assume that firm Y adopts a low-price strategy;while firm X maintains a high-price strategy. Compared to the results from a high-price;strategy for both firms, firm Y will now;A. Gain $100,000 in profit and firm X will lose $150,000 in profit;B. Gain $150,000 in profit and firm X will lose $100,000 in profit;C. Gain $525,000 in profit and firm X will lose $275,000 in profit;D. Lose $150,000 in profit and firm X will gain $150,000 in profit;151. Refer to the above payoff matrix. If both firms operate independently and do not;collude, the most likely profit is;A. $400,000 for firm X and $400,000 for firm Y;B. $725,000 for firm X and $475,000 for firm Y;C. $475,000 for firm X and $725,000 for firm Y;D. $625,000 for firm X and $625,000 for firm Y;172. Suppose a few powerful firms control all production in an industry and face;identical demand and cost schedules. If they successfully collude and maximize joint;profits, then price, output, and profit levels in the industry will be the same as those in;A. Pure monopoly;B. Regulated monopoly;C. Monopolistic competition;D. 176. The incentive to cheat is strong in a cartel because;A. Each firm can increase its output and thus its profits by cutting price;B. The marginal revenue is greater than marginal cost at the profit-maximizing price set;by the cartel;C. There is a significant lack of government regulation of cartels, especially those in;worldwide production;D. The costs of production are the same for each firm, but the product demand differs;183. Informal collusion to restrict output and increase prices is sometimes referred to as;a;A. Merger;B. Cartel;C. Tacit understanding;D. Kinked demand curve model

 

Paper#31461 | Written in 18-Jul-2015

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