Question 1(1 point)

When only a small number of producers compete with each other is a defining characteristic of

a	oligopoly.
b	inelastic supply.
c	monopolistic competition.
d	efficient competition.

Question 2(1 point)

An example of oligopoly is

a	wheat farming.
b	the clothing industry.
c	long-distance telephone service.
d	the restaurant industry.

Question 3(1 point)

Game theory is distinctive in that its elements are

a	costs, prices, and profits.
b	rules, strategies, payoffs, and outcomes.
c	revenues, elasticity, and profits.
d	patents, copyrights, and barriers to entry.

Question 4(1 point)

The prisoners' dilemma describes a single-play game that features

a	a large number of rivals cooperating with each other.
b	a situation in which one player has better odds than the other.
c	an outcome in which the participants collude.
d	two players who are unable to communicate with each other.

Question 5(1 point)

In the prisoners' dilemma game, each player

a	can choose from four strategies.
b	has only one possible strategy.
c	can choose from three strategies.
d	can choose from two strategies.

Question 6(1 point)

The simplest prisoners' dilemma is a game that, in part, requires

a	an oligopoly with a dominant firm.
b	two players who are able to communicate with each other.
c	two players who are unable to communicate with each other.
d	monopolistic competition.

Question 7(1 point)

The table above displays the possible outcomes for Bob and Joe, who have been arrested for armed robbery and car theft. Which of the following is true?

a	If Joe confesses, Bob should not confess.
b	The dominant equilibrium is that Joe and Bob both serve 2 years.
c	If Bob confesses, Joe should confess.
d	If Joe does not confess, Bob should not confess.

Question 8(1 point)

The prisoners' dilemma has an equilibrium in which

a	both players confess.
b	the player who confesses wins.
c	the player who denies wins.
d	both players deny.

Question 9(1 point)

The prisoners' dilemma has an equilibrium that is

a	not a Nash equilibrium and both players confess.
b	a Nash equilibrium and both players confess.
c	not a Nash equilibrium and both players deny.
d	a Nash equilibrium and both players deny.

Question 10(1 point)

A duopoly is a form of

a	monopolistic competition.
b	monopoly.
c	perfect competition.
d	oligopoly.

Question 11(1 point)

A cartel usually has a collusive agreement to

a	lower the price.
b	restrict output.
c	boost output.
d	increase the number of firms in the industry.

Question 12(1 point)

If there is a collusive agreement in a duopoly to maximize profit, then the price will

a	equal the marginal cost of production.
b	be the same as the price set by a competitive industry.
c	equal the average total cost of production.
d	be the same as the price set by a monopoly.

Question 13(1 point)

The maximum total economic profit that can be made by colluding duopolists

a	exceeds the economic profit made by a monopolist.
b	equals the economic profit made by a monopolist.
c	bears no necessary relation to the economic profit made by a monopolist.
d	is less than the economic profit made by a monopolist.

Question 14(1 point)

Sears and WalMart must decide whether to lower their prices, based on the potential economic profits shown in the table above. Which of the following is true?

a	This situation is not a prisoners' dilemma.
b	If WalMart lowers its prices, Sears should keep its prices high.
c	Both Sears and WalMart would jointly be better off if they could each keep their prices high.
d	If Sears lowers its prices and WalMart does not, Sears will earn a $20 million economic profit.

Question 15(1 point)

Refer to the payoffs in the table above. Sears and WalMart must decide whether to lower their prices based on the potential profits shown in the table. This game has

a	no Nash equilibrium.
b	a Nash equilibrium: both Sears and WalMart lower prices.
c	a Nash equilibrium: both Sears and WalMart keep prices high.
d	a Nash equilibrium: Sears keeps its prices high and Walmart lowers its prices.

Question 16(1 point)

A strategy in which a player cooperates in the current period if the other player cooperated in the previous period, but the player cheats in the current period if the other player cheated in the previous period is called a

a	trigger strategy.
b	tit-for-tat strategy.
c	duopoly strategy.
d	dominant firm strategy.

Question 17(1 point)

Price wars are

a	equally likely in the cases of monopoly, oligopoly, and perfect competition.
b	most likely when there is a monopoly.
c	most likely when there is perfect competition.
d	most likely when there is oligopoly.

Question 18(1 point)

Which of the following is characteristic of oligopoly, but NOT of monopolistic competition?

a	Firms are profit-maximizers.
b	Each firm faces a downward-sloping demand curve.
c	There is more than one firm in the industry.
d	The choices made by one firm have a significant effect on other firms.

Question 19(1 point)

One difference between oligopoly and monopolistic competition is that

a	monopolistic competition has barriers to entry.
b	fewer firms compete in oligopoly than in monopolistic competition.
c	a monopolistically competitive industry has fewer firms.
d	in monopolistic competition, the products are identical.

Question 20(1 point)

A monopolistically competitive firm has ________ power to set the price of its product because ________.

a	no; there are no barriers to entry
b	some; of product differentiation
c	no; of product differentiation
d	some; there are barriers to entry

Question 21(1 point)

One difference between perfect competition and monopolistic competition is that

a	in perfect competition, firms produce slightly differentiated products.
b	firms in monopolistic competition face a downward-sloping demand curve.
c	a perfectly competitive industry has fewer firms.
d	monopolistic competition has barriers to entry.

Question 22(1 point)

Product differentiation is a defining characteristic of

a	perfectly elastic demand.
b	monopolistic competition.
c	oligopoly.
d	perfect competition.

Question 23(1 point)

Firms in monopolistic competition can achieve product differentiation by

a	advertising special characteristics.
b	exploiting economies of scale in production.
c	expanding plant size.
d	setting the price equal to average revenue.

Question 24(1 point)

An example of a monopolistically competitive industry is

a	the restaurant industry.
b	wheat farming.
c	phone service.
d	the automobile industry.

Question 25(1 point)

If an industry lacks barriers to entry and each of the many firm faces a demand curve with a negative slope, the industry is

a	perfectly competitive.
b	a monopoly.
c	monopolistically competitive.
d	an oligopoly.

Question 26(1 point)

Firms in monopolistic competition always will

a	produce at the minimum average total cost.
b	set their price above their marginal cost.
c	earn an economic profit.
d	set their price equal to their marginal cost.

Question 27(1 point)

Firms in monopolistic competition have rivals that

a	agree on a common price.
b	match their price increases.
c	match their price decreases.
d	set their prices according to the demand curves they face.

Question 28(1 point)

In the short run, a monopolistically competitive firm chooses

a	its quantity but not its price.
b	its price but not its quantity.
c	both its price and its quantity.
d	neither its price nor its quantity.

Question 29(1 point)

In monopolistic competition, in the short run a firm maximizes its profit by selecting an output at

which marginal cost equals

a	zero
b	price.
c	zero
d	marginal revenue.

Question 30(1 point)

In the long run, a monopolistically competitive firm can earn

a	no economic profit, but a monopoly might.
b	an economic profit, but a monopoly cannot.
c	no economic profit, and neither can a monopoly.
d	an economic profit, and so can a monopoly.

Question 31(1 point)

In the above figure, if the firm is in monopolistic competition, it will produce

a	100 units.
b	between 60 and 80 units.
c	60 units.
d	40 units.

Question 32(1 point)

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In the above figure, if the firm is in monopolistic competition, its price will be

a	$3.
b	$1.
c	$2.
d	$4.

Question 33(1 point)

In the above figure, the monopolistically competitive firm earns an economic profit of

a	$0.
b	greater than $100.01 per day.
c	between $0 and $50 per day.
d	between $50.01 and $100 per day.

Question 34(1 point)

The above figure is for a firm in monopolistic competition. The diagram represents the short run rather than the long run because

a	the firm is incurring an economic loss.
b	the MR curve cuts the ATC curve from below.
c	the firm is earning an economic profit.
d	the MR curve and the D curve do not coincide.

Question 35(1 point)

The figure above shows a monopolistically competitive firm in the short run. During the transition to the long run, the demand curve will shift ________ and the MR curve will shift ________.

a	leftward; leftward
b	leftward; rightward
c	rightward; leftward
d	rightward; rightward

Question 36(1 point)

In long-run equilibrium, a firm in monopolistic competition earns

a	an economic profit that is the same amount as it would be if the firm was a monopoly.
b	an economic profit that is higher than what it would be if the firm was a monopoly.
c	a normal profit.
d	an economic profit but the economic profit is less than it would be if the firm was a monopoly.

Question 37(1 point)

In the long run, a firm in monopolistic competition will

a	earn zero economic profit, that is, a normal profit.
b	earn a positive economic profit.
c	None of the above answers is necessarily correct because the amount of the profit or loss depends on the slope of the demand curve.
d	earn a negative economic profit, that is, an economic loss.

Question 38(1 point)

In the long run, a monopolistically competitive firm's price equals its

a	marginal cost but not its average total cost.
b	neither marginal cost nor its average total cost.
c	average total cost but not its marginal cost.
d	average total cost and its marginal cost.

Question 39(1 point)

In long-run equilibrium, a firm's price definitely equals its average total cost in both

a	oligopoly and monopoly.
b	oligopoly and monopolistic competition.
c	perfect competition and monopolistic competition.
d	perfect competition and monopoly.

Question 40(1 point)

Advertising by firms in monopolistic competition

a	provides consumers with no useful information.
b	wastes resources because the entry of rivals forces firms to be price takers.
c	can persuade customers that product differentiation exists.
d	does not occur.