1. In the cement industry, firms are limited in their productive decisions by capacity. That is, they can only expand production as long as their capacity allows it.

Assuming that no collusion takes place, we should expect prices in the cement industry to be ______ marginal cost (which is equal to prices in a competitive industry). We should expect quantity to be ______ quantity in the competitive equilibrium.

A) Greater than; smaller than

B)Equal to; equal to

C) Greater than; greater than

2. Consider an oligopoly industry where firms are not limited by capacity (that is, they basically can expand production as much as they need to in response to market events).

In this industry, price will be _______ marginal cost.

A)Equal to

B) Smaller than

3. Oligopoly profits will be higher if:

A) There are no capacity constraints and market entry is hard

B) There are at least some capacity constraints and market entry is easy

C) There are at least some capacity constraints and market entry is hard