1

In the long-run, firms in monopolistically competitive market will earn

a) zero profit

b) profit greater than 0

c) profit less than 0

2

A monopolistically competitive firm will choose its profit-maximizing price and quantity from

a) the market demand curve

b) its marginal cost curve

c) the firm product demand curve

d) its average total cost curve

3

Which of the following is true about a monopolistically competitive market?

a) A firm's marginal revenue curve will slope upwards

b) The profit-maximizing price of the good will be greater than its marginal cost

c) Firms will choose the profit-maximizing price and quantity combination from the market demand curve

d) The market demand curve will be more elastic than the demand curve for a particular firm's good

e) A firm will produce where the market demand curve crosses its marginal cost curve

4

A monopolistic competitor faces the following demand curve for their good:

Price	10	9	8	7	6	5	4	3	2
Quantity	0	1	2	3	4	5	6	7	8

and the following costs:

TC	10	18	22	27	33	40	48	58	70
Quantity	0	1	2	3	4	5	6	7	8

What is the profit-maximizing price and quantity?

a) Price = 6, Quantity = 4

b) Price = 9, Quantity = 1

c) Price = 5, Quantity = 5

d) Price = 7, Quantity = 3

5

Because each oligopolist cares about its own short-run profit

a) it is difficult for cartels to maintain monopoly power

b) it will be easier to maintain collusive agreements

c) each firm's profit always ends up being zero

d) competitive pressures are absent from the market

6

The equilibrium price and quantity in an oligopoly is:

a) The same as what occurs under monopoly

b) Where the market demand curve crosses the MC curve

c) Where the MR and MC intersect

d) The same as what occurs under perfect or monopolistic competition

e) None of these answers are the equilibrium

7

A cartel occurs when:

a) Firms cut prices in order to compete for customers

b) Firms cooperate with each other in order to maximize the profit of the group

c) Firms set prices and quotas in order to behave as a monopolistic competitor

d) Firms use high barriers to entry to prevent competitors from entering the market

8

Calhoun and Jolly industries are fighting for control of the Meat Juice market. After years of price cutting and industrial sabotage they've decided to discuss the possibility of forming a cartel. The payouts are given in the form: (Calhoun's payout, Jolly's payout).

	Jolly chooses "Collude"	Jolly chooses "Don't Collude"
Calhoun chooses "Collude"	$600k, $600k	$-100k, $400k
Calhoun choose "Don't Collude"	$400k, $-100k	$100k, $100k

What is the dominant strategy equilibrium of this market?

a) Dominant Strategy Equilibrium is (Collude, Don't collude)

b) Dominant Strategy Equilibrium is (Collude, Collude)

c) Dominant Strategy Equilibrium is (Don't collude, Don't collude)

d) Dominant Strategy Equilibrium is (Don't collude, Collude)

e) There is no dominant strategy equilibrium

9

Given the following payout matrix, find the dominant strategy equilibrium. Assume the payouts are of the form (Tammy's payout, Beth's payout) and higher numbers are preferred to lower numbers.

	Beth chooses "Choice A"	Beth chooses "Choice B"
Tammy chooses "Choice A"	4, 4	7, 3
Tammy chooses "Choice B"	6, 7	10, 6

The dominant strategy equilibrium is:

a) Dominant Strategy Equilibrium is (4, 4)

b) Dominant Strategy Equilibrium is (6, 7)

c) Dominant Strategy Equilibrium is (7, 3)

d) Dominant Strategy Equilibrium is (10, 6)

e) There is no dominant strategy equilibrium

10

In which market structure(s) might the price be only slightly higher than perfect competition?

a) Monopolistic Competition only

b) Oligopoly only

c) Both Monopolistic Competition and Oligopoly are possible

d) Neither market structure