Multiple Choice -- The second exam this semester (spring
2012) will not include Game Theory.
Identify the
letter of the choice that best completes the statement or answers the question.
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1.
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Monopolistically competitive industries consist of
a. one firm
selling several products b. one firm selling one product c. many
firms, all selling identical products d. many firms, each selling a slightly
different product e. many firms, each selling a completely different
product
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2.
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Monopolistically competitive firms ignore the effect of their decisions upon other
firms in the industry because
a. each firm is large relative to the
market b. each firm is small relative to the market c. there are
few sellers in the market d. there is only one seller in the market
e. all firms follow the same known pricing rules
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3.
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All
of the following are examples of product differentiation except one. Which is the
exception?
a. developing a new video game or a computer program called
"How to Teach Your New Dog Old Tricks" b. manufacturing a car that
minimizes outside noise relative to other cars c. lowering the price of a good in a
special sale d. providing movies and special meals on airline flights
e. making sodium-free, caffeine-free colas
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4.
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A
firm could differentiate its product by all except one of the following means. Which is the
exception?
a. making the product available at a number of different
locations b. increasing the number of services that accompany the
product c. making the product physically different from other products
d. using packaging or advertising to create a special subjective image of the product in the
consumer's mind e. emphasizing that the product provides the same benefits to
consumers as the others on the market, even when it's really physically different
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5.
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The
demand curve facing a firm will be more elastic,
a. the
fewer the number of competing firms b. the more differentiated the
product c. the more substitutes there are for its product d. the
greater the firm's ability to control price e. the larger the profit the firm can
make
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6.
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At
the profit-maximizing output, the firm in Exhibit 0157 is earning
a. an
economic profit of $38 b. an economic profit, but the amount cannot be
determined c. zero economic profit d. an economic profit of
$32 e. an economic loss
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7.
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At
the profit-maximizing output level, total cost for the firm in Exhibit 0162 is
approximately
a. $5,700 b. $5,320
c. $4,750 d. $4,940 e. $8,100
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8.
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Assume the firm in Exhibit 10-1 is currently charging price P and producing output
level Q. In order to maximize profits (or minimize losses), the firm
should
a. charge more and sell less b. charge less and
sell more c. charge less and sell less d. charge more and sell
more e. continue to charge P and sell Q
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9.
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Describe the relationship among market price (P), average revenue (AR), and marginal
revenue (MR) for a firm in monopolistic competition.
a. P = AR =
MR b. P > AR = MR c. P = AR > MR d. P >
AR > MR e. P = AR < MR
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10.
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In
the long run, a monopolistically competitive firm will
a. produce
a greater variety of goods than do firms in other market structures b. produce a
greater output level than would a perfectly competitive firm c. produce where price
equals average total cost d. earn an economic profit e. suffer a
loss because of its advertising budget
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11.
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Assume that the firm in Exhibit 0161 maximizes profit. Its total revenue
is
a. $5,200 b. $4,000 c. $3,600
d. $5,600 e. $3,200
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12.
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At
the profit-maximizing output level, total cost for the firm in Exhibit 0161
is
a. $5,200 b. $4,000 c. $3,600
d. $5,600 e. impossible to determine
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13.
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As
new monopolistically competitive firms enter the market, the demand facing each firm __________,
causing the price charged by each firm to __________ . In the long run, each firm will earn a
__________ profit.
a. falls; rise; positive b. rises; fall;
positive c. falls; rise; normal d. rises; fall; normal
e. falls; fall; normal
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14.
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Which
of the following characteristics does perfect competition share with monopolistic
competition?
a. price-taking firms b. zero long-run economic
profit c. homogeneous product d. some barriers to entry
e. economies of scale in production
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15.
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Suppose that firms in a monopolistically competitive industry are earning short-run
economic profits. In the long run, the demand curve facing each individual firm can be expected
to
a. shift to the left and become flatter b. shift to the left and
become steeper c. shift to the right and become flatter d. shift to
the right and become steeper e. remain constant
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16.
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One
difference between perfect competition and monopolistic competition is
that
a. in perfect competition, firms can't earn long-run economic profit
b. in perfect competition, firms take full advantage of economies of scale in long-run
equilibrium; in monopolistic competition, firms do not c. only under perfect
competition is there ease of entry and exit d. in monopolistic competition, the
firm's demand curve is horizontal; in perfect competition, the firm's demand curve slopes
downward e. in perfect competition, there are many firms; under monopolistic
competition, there are few firms
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17.
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Which
of the following is unique to perfect competition?
a. The
individual firm cannot earn economic profit in the long run. b. It is easy for new
firms to enter the industry. c. The market demand curve slopes downward.
d. The demand curve facing an individual firm is perfectly elastic. e. The
firms in the industry produce a homogeneous product.
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18.
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The
automobile, breakfast cereal, and tobacco industries are examples of
a. monopolistic competition b. oligopoly
c. perfect competition d. monopoly e. monopsony
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19.
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Oligopolists are more sensitive to the pricing and output policies of their rivals
when
a. all firms produce identical products b. their products are
highly differentiated c. there is freedom of entry and exit
d. there are barriers to entry e. there are many firms in the
industry
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20.
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The
defining characteristic of oligopoly is product differentiation.
a. True b. False
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21.
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Minimum efficient scale is large relative to the market in
oligopoly.
a. True b. False
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22.
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Which
of the following is not an example of an oligopolistic barrier to
entry?
a. diseconomies of scale b. legal
restrictions c. advertising and brand proliferation d. high
start-up costs e. control over an essential resource
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23.
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A
cartel's marginal cost curve is the
a. highest of all the individual firms' marginal
cost curves b. lowest of all the individual firms' marginal cost curves
c. horizontal sum of all the individual firms' marginal cost curves d. average
of all the individual firms' marginal cost curves e. product of all the individual
firms' marginal cost curves
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24.
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Three
firms that are successful in colluding to raise their prices must
a. lose
profits b. announce any price changes to the government c. restrict
output d. increase advertising to earn a profit e. expand
production
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25.
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A
formal agreement among the firms in an industry to coordinate their production and pricing decisions
in order to earn monopoly profits is known as
a. price
discrimination b. the kinked demand curve c. monopolistic
competition d. a cartel e. joint competition
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26.
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Each
member of a cartel
a. faces a temptation to cheat on the agreement because lowering
its price slightly below the established price will usually increase the firm's sales and
profit b. faces a temptation to cheat on the agreement because raising its price
slightly above the established price will usually increase the firm's sales and profit
c. has no temptation to cheat on the agreement because lowering its price slightly below the
established price will usually have no impact on the firm's sales and profit d. has
no temptation to cheat on the agreement because raising its price slightly above the established
price will usually decrease the firm's sales and profit e. has no temptation to
cheat on the agreement because lowering its price slightly below the established price will usually
lower the firm's sales and profit
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27.
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Collusion is easier to achieve and maintain in oligopoly
when
a. there are many firms in the industry b. the firms' products
are homogeneous c. the firms' cost structures are very different
d. there are very weak barriers to entry e. the industry is located in the
United States
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28.
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One
common assumption in game theory is that firms
a. try to
avoid the worst outcome b. try to achieve the best outcome
c. minimize losses d. always cooperate e. always
compete
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29.
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The
prisoner's dilemma provides an explanation for
a. the
price wars that sometimes occur in oligopolies b. the ability of firms in an
oligopoly to extract the entire consumer surplus c. the collusive behavior that
sometimes occurs in an oligopoly d. the failure of firms in non-competitive
industries to maximize profits e. an irrational behavior that occurs in competitive
markets
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30.
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The
tit-for-tat strategy implies that the firms
a. in
non-competitive industries match price increases but ignore price decreases b. will
follow the lead of the dominant firm in making pricing decisions c. prices will
change whenever fixed cost changes d. cooperate on the first round, and then follow
your competitors reactions on the second round e. price will only change if demand
changes
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