Part A

1.Which of the following is a characteristic of an oligopoly?

a.Firms has no price-setting power.

b.Firms are interdependent with each other.

c.There are a large number of firms.

d.There is no entry barrier.

2.In which of the following market types would there be a few rival firms?

a.Perfect competition.

b.Monopoly.

c.Monopolistic competition.

d.Oligopoly.

3.Two oligopolistic firms forming a cartel will want to set a price so that the cartel produces_________the allocatively efficient amount.

a.less than

b.more than

c.the same amount as

d.One cannot tell.

4.Which of the following best represents the prices that will be charged by perfectly competitive firms, monopolies, and monopolistically competitive firms? Assume that there are no economies of scale.

a.A monopolistically competitive firm and a monopoly will charge the highest prices. The perfectly competitive firm will change the lowest.

b.A monopoly will charge the highest and monopolistically competitive firms the lowest.

c.A monopolistically competitive firm will charge the highest and perfectly competitive firms the lowest.

d.A monopoly will charge the highest and perfectly competitive firms the lowest.

e.A monopolistically competitive firm will charge the highest and monopolistic firms the lowest.

5.In a long-run equilibrium, which of the following might have economic profits?

a.Monopolies, oligopolies, monopolistically competitive firms, and perfect competitors.

b.Monopolies and oligopolies.

c.Oligopolies, monopolistically competitive firms, and perfect competitors.

d.Monopolistically competitive firms and perfect competitors.

e.Perfect competitors.

6.Monopolistically competitive firms will, in the long run:

a.Earn economic profits and produce allocatively efficient amounts of output.

b.Not earn economic profits, but will produce allocatively efficient amounts of output.

c.Earn economic profits, but produce less than allocatively efficient amounts of output.

d.Neither make economic profits nor produce allocatively efficient amounts of output.

7.What is a characteristic seen in both perfect competition and monopolistic competition?

a.Collusion among firms.

b.Many producers.

c.Firms selling identical products.

d.Barriers to entry.

8.Consider perfect competition and monopolistic competition. In which market structure(s) will we see differentiated products?

a.Perfect competition.

b.Monopolistic competition.

c.Both perfect and monopolistic competition.

d.Neither.

9.A monopolistically competitive firm will maximize economic profits by choosing the output level Q that occurs where:

a.P = ATC

b.MR = MC

c.P + MR = ATC

d.P = MC

10.Consider monopolistic competition and oligopoly. In which market structure(s) will we likely see barriers to entry?

a.Monopolistic competition.

b.Oligopoly.

c.Both monopolistic competition and oligopoly.

d.Neither.

Part B

1.In the long run, monopolistically competitive firms will earn______________economic profits and charge prices that are______________marginal costs.

a.zero; greater than

b.zero; equal to

c.positive; greater than

d.positive; equal to

e.positive; equal to or greater than

2.Monopolistically competitive firms are likely to have______________prices in the long run than will occur in a perfectly competitive industry producing similar goods.

a.higher

b.smaller

c.the same as

d.one cannot tell

3.An industry that has very few but large firms and a significant amount of communication among firms will likely produce______________the same industry if communication is rare and difficult.

a.more than

b.less than

c.either more or less than

d.the same amount as

4.Monopolistically competitive firms, in the long run, will produce:

a.More than competitive firms with identical costs and earn economic profits.

b.More than competitive firms with identical costs and not earn economic profits.

c.Less than competitive firms with identical costs and not earn economic profits.

d.Less than competitive firms with identical costs and earn economic profits.

5.In a long-run equilibrium, which of the following might have economic profits?

a.Perfect competitors.

b.Monopolies, oligopolies, monopolistically competitive firms, and perfect competitors.

c.Monopolies and oligopolies.

d.Oligopolies, monopolistically competitive firms, and perfect competitors.

e.monopolistically competitive firms and perfect competitors

6.Perfect competition has_________and monopolistic competition has_________.

a.free entry, entry barriers.

b.technical inefficiency, technical efficiency.

c.identical products, differentiated products.

d.perfect information, asymmetric information.

7.Consider perfect competition and monopolistic competition. In which market structure(s) will we see firms producing at an output level where P is equal to the minimum value of ATC in the long-run equilibrium?

a.Perfect competition.

b.Monopolistic competition.

c.Both perfect and monopolistic competition.

d.Neither.

8.Which of the following is a reason that monopolistically competitive firms may have higher costs than perfectly competitive firms? Monopolistically competitive firms might:

a.Advertise to differentiate their products from other firms.

b.Spend resources to create entry barriers so others can't compete.

c.Try to make their products homogenous to a competitor's product.

d.Try to shift their cost curves above their demand curves.

9.In the long run equilibrium for a monopolistically competitive firm:

a.The firm will be at the unit elastic point on its demand curve.

b.The demand curve for the firm will be horizontal.

c.P = AC

d.P = MR

e.MR = 0

10.Consider monopolistic competition and oligopoly. In which market structure(s) will we see a large number of relatively small firms?

a.Monopolistic competition.

b.Oligopoly.

c.Both monopolistic competition and oligopoly.

d.Neither.

Part C

1.Which one of the following markets has many rival firms producing differentiated products?

a.Perfect competition.

b.Monopoly.

c.Monopolistic competition.

d.Oligopoly.

2.An oligopolistic industry that is successful in maintaining a cartel will produce:

a.Too little output for allocative efficiency.

b.Too much output for allocative efficiency.

c.An amount that is allocatively efficient.

d.Too little output for allocative efficiency if one firm violates the cartel agreement.

e.Too much output for allocative efficiency if one firm violates the cartel agreement.

3.Monopolistically competitive firms in the long run______________be technically efficient and______________economic profits.

a.will; will earn

b.will not; will not earn

c.will; will not earn

d.will not; will earn

4.Which of the following best represents the order (from lowest to highest) of likely price levels of firms facing similar cost structures in each of the market structures?

I Perfect competition

II Monopolistic competition

III Oligopoly

IV Monopoly

a.I and II; III and IV

b.I; II; III; IV

c.I and III; II; IV

d.I; II; IV; III

5.A monopolistically competitive firm will be likely to charge prices that are______________perfectly competitive firms with similar costs in the long run and produce levels of output that are______________the perfectly competitive firms.

a.equal to; equal to

b.greater than; greater than

c.greater than; less than

d.less than; greater than

e.less than; less than

6.An oligopolist will price discriminate if it can by raising prices on customers with______________demands and lower prices on customers with______________demands.

a.elastic; elastic

b.inelastic; inelastic

c.elastic; inelastic

d.inelastic; elastic

e.None of these answers is correct as an oligopolist will never price discriminate.

7.What is a characteristic seen in both perfect competition and monopolistic competition?

a.Collusion among firms.

b.Small number of competitors.

c.Firms selling identical products.

d.Freedom of entry and exit.

8.Consider perfect competition and monopolistic competition. In which market structure(s) will we see firms producing at an output level where P is greater than the minimum value of ATC in the long-run equilibrium?

a.Perfect competition.

b.Monopolistic competition.

c.Both perfect and monopolistic competition.

d.Neither.

9.Consider perfect competition and monopolistic competition. In which market structure(s) will we see firms producing at an output level where P = ATC in the long-run equilibrium?

a.Perfect competition.

b.Monopolistic competition.

c.Both perfect and monopolistic competition.

dNeither.

10.Economic profit earned by a monopolistically competitive firm is equal to:

a.P x Q

b.(P x Q) - MC

c.(P - MC) x Q

d.(P - AC) x Q