Micro Quiz 5 - Custom Scholars
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Micro Quiz 5

question
Monopolistic competition means:
answer
C. firms differentiate their output, which makes them price-makers, but barriers to entry are low or non-existent
question
A monopolistically competitive market is characterized by:
answer
A. many small sellers selling a differentiated product
question
Which of the following statements best describes firms under monopolistic competition?
answer
B. the firms compete using quality, location, and style
question
Monopolistic competition:
answer
B. is more similar to perfect competition than to monopoly
question
Which of the following market structures describes an industry in which all firms produce differentiated output and there are few barriers to entry?
answer
E. monopolistic competition
question
If a firm has substantial market power, it must be operating an industry that would be classified as:
answer
A. a monopoly
question
If the marginal revenue curve lies above the demand curve for a firm:
answer
A. this is not a firm that exists in any traditional industries
question
A monopolistically competitive firm usually charges less than a monopoly firm because:
answer
D. it faces some degree of competition due to low barriers to entry
question
The shape and/or slope of the marginal revenue curve under monopolistic competition is:
answer
E. downward-sloping and twice as steep as the demand curve
question
Which of the following statements best describes the price, output, and profit conditions of monopolistic competition?
answer
C. marginal revenue will equal marginal cost in the short run at a profit-maximizing level of output; in the long run, economic profit will be zero
question
Which of the following is true in long-run equilibrium for both a competitive market and monopolistic competition?
answer
D. Economic profit is zero
question
The theory of monopolistic competition predicts that, in long-run equilibrium, a monopolistically competitive firm will:
answer
A. produce the output level at which price equals long-run average cost
question
Profit-maximizing, monopolistically competitive firms:
answer
E. cannot be guaranteed an economic profit in any period and might incur losses
question
If a monopolistically competitive firm is incurring losses, then at the profit-maximizing output amount:
answer
B. price is below the average total cost curve
question
Both competitive and monopolistically competitive firms:
answer
C. can maximize profit by producing to the point where marginal cost = marginal revenue
question
The marginal revenue of a monopolistically competitive firm will always be:
answer
A. less than the price
question
Which of the following best describes the relationship between price and marginal revenue for monopolistic competitors?
answer
D. price is above marginal revenue, as a general rule, regardless of the number of firms in the monopolistically competitive industry
question
If the price that determined where marginal revenue equaled marginal cost were below the bottom of the average variable cost curve, then the profit-maximizing, monopolistically competitive firm would:
answer
D. shut down because it would cost more to produce and sell output than it would to shut down and lose all fixed costs
question
An increase in marginal cost causes a profit-maximizing, monopolistically competitive firm to:
answer
B. raise price and decrease output
question
Profit-maximizing, monopolistically competitive firms:
answer
C. consider only marginal cost and marginal revenue, which determine the level of output---and the level of output determines price
question
If monopolistically competitive firms are making positive economic profits, then new firms would:
answer
E. begin to enter the industry
question
Entry of new firms will continue in a monopolistically competitive industry until:
answer
D. economic profit equals zero
question
The entry of new firms into a monopolistically competitive industry causes the:
answer
D. existing firm's demand curve to shift left
question
The demand curve for a monopolistically competitive firm is downward sloping because of:
answer
B. product differentiation
question
The difference between price and marginal cost is:
answer
D. markup
question
A monopolistically competitive firm usually charges more than a perfectly competitive firm because:
answer
D. producing differentiated output is more expensive than producing homogenous output
question
In a monopolistically competitive industry, price:
answer
E. is most likely a bit higher than the competitive market price because of the cost of variety
question
Perfect competition and monopolistic competition are similar because, under both market structures:
answer
A. there are zero economic profits in the long run
question
A competitive firm would have:
answer
A. more elastic demand than a monopolistically competitive firm
question
Excess capacity best describes the fact that:
answer
A. monopolistically competitive firms produce less than the cost-minimizing level of output
question
Monopolistic competition is inefficient because:
answer
C. price is not equal to the minimum average total cost
question
A monopolistically competitive firm is inefficient because the firm:
answer
D. produces an output where average total cost is not minimum
question
One source of economic inefficiency from monopolistic competition is:
answer
A. markup
question
The concept of markup under monopolistic competition would best be described as the:
answer
E. difference between the marginal cost and the price of the monopolistic competitor
question
Markup would generally be highest under:
answer
A. a monopoly
question
When a perfectly competitive firm or a monopolistically competitive firm is making zero economic profit:
answer
A. the industry is in equilibrium; no firms will want to enter or exit
question
If a monopolistically competitive firm wants to maximize profits, it will increase production until:
answer
E. marginal revenue= marginal cost
question
Product differentiation makes the demand for a monopolistically competitive firm's product:
answer
B. less elastic than in a competitive market
question
Advertising is designed to:
answer
B. decrease the price elasticity of demand for the firm and shift the firm's demand curve rightward
question
Successful advertising:
answer
C. normally causes demand for the firm to shift right
question
Because of successful advertising:
answer
E. the demand curve facing each firm shifts right, while the cost curve shifts upward
question
Successful advertising under monopolistic competition might:
answer
D. reduce the price elasticity of demand for that firm's output
question
When would advertising be least effective?
answer
A. in a perfectly competitive industry
question
Why would perfectly competitive industries advertise even though individual firms do not?
answer
A. even though the output of an individual firm would be considered homogeneous to other firms, the industry output would be differentiated (ex florida oj vs imports)
question
One drawback to advertising might be that it could easily:
answer
A. raise costs but not increase demand
question
Like a pure monopoly, an oligopoly is characterized by:
answer
C. significant barriers to entry
question
________ have a greater incentive to collude and to form cartels in an effort to achieve monopoly-like profits
answer
E. oligopolists
question
A monopolistically competitive market consists of many sellers, an oligopoly consists of _______ seller(s), and a monopoly consists of ________ seller(s)
answer
D. a few; one
question
A monopolistically competitive market consists of _______ seller(s), and oligopoly consists of _______ seller(s), and a monopoly consists of one seller
answer
E. many, a few
question
A firm operating in an oligopolistic market has ________ market power compared to a _______
answer
C. less; monopolist
question
Economists measure oligopoly power present in an industry by using:
answer
B. concentration ratios
question
Oligopolistic markets are _______ because price is ________ marginal cost
answer
E. socially inefficient; greater than
question
When two or more firms form a _______ agreement and set price and quantity in unison, economics refer to them as _______
answer
C. collusive; a cartel
question
When a market is characterized by mutual independence:
answer
D. the actions of one firm have an impact on the price and output of its competitors
question
Assume all markets are in long-run equilibrium. The market quantity supplied in an oligopoly would be _____ the market quantity supplied in a monopoly and ______ the market quantity supplied in a competitive market
answer
E. greater than; less than
question
Assume all markets are in long-run equilibrium. Market price in an oligopoly would be _______ the market price in a monopoly, and _______ the market price in a competitive market
answer
B. less than; greater than
question
When a third firm enters a market that was previously categorized as a duopoly, the equilibrium price:
answer
C. will be lower and the equilibrium quantity will be higher
question
When more firms enter into a market that was previously characterized as a duopoly, it will:
answer
B. be more difficult for firms in the market to form a successful cartel
question
The ______ effect occurs when the market price either decreases or increases by the respective entrance or exit of a rival firm in the market
answer
B. price
question
The two major pieces of antitrust legislation in the United States are the:
answer
B. sherman antitrust act and the clayton act
question
The practice of setting prices deliberately below average variable costs in order to put a rival out of business is known as:
answer
D. predatory pricing
question
Suppose Firm A sets a price below average variable cost for two years. After the second year, Firm A's biggest rival goes bankrupt and exits the market. In the third year, Firm A raises prices significantly. Firm A is practicing:
answer
E. predatory pricing
question
The _______ demand curve theory states that oligopolists tend to respond aggressively to the price cuts of rivals but largely ignore price increases
answer
C. kinked
question
According to the kinked demand curve theory, the behavior of firms in an oligopoly creates a demand curve that is _______ at prices above the cartel price and ________ at prices below the cartel price
answer
E. more elastic; more inelastic
1 of 64
question
Monopolistic competition means:
answer
C. firms differentiate their output, which makes them price-makers, but barriers to entry are low or non-existent
question
A monopolistically competitive market is characterized by:
answer
A. many small sellers selling a differentiated product
question
Which of the following statements best describes firms under monopolistic competition?
answer
B. the firms compete using quality, location, and style
question
Monopolistic competition:
answer
B. is more similar to perfect competition than to monopoly
question
Which of the following market structures describes an industry in which all firms produce differentiated output and there are few barriers to entry?
answer
E. monopolistic competition
question
If a firm has substantial market power, it must be operating an industry that would be classified as:
answer
A. a monopoly
question
If the marginal revenue curve lies above the demand curve for a firm:
answer
A. this is not a firm that exists in any traditional industries
question
A monopolistically competitive firm usually charges less than a monopoly firm because:
answer
D. it faces some degree of competition due to low barriers to entry
question
The shape and/or slope of the marginal revenue curve under monopolistic competition is:
answer
E. downward-sloping and twice as steep as the demand curve
question
Which of the following statements best describes the price, output, and profit conditions of monopolistic competition?
answer
C. marginal revenue will equal marginal cost in the short run at a profit-maximizing level of output; in the long run, economic profit will be zero
question
Which of the following is true in long-run equilibrium for both a competitive market and monopolistic competition?
answer
D. Economic profit is zero
question
The theory of monopolistic competition predicts that, in long-run equilibrium, a monopolistically competitive firm will:
answer
A. produce the output level at which price equals long-run average cost
question
Profit-maximizing, monopolistically competitive firms:
answer
E. cannot be guaranteed an economic profit in any period and might incur losses
question
If a monopolistically competitive firm is incurring losses, then at the profit-maximizing output amount:
answer
B. price is below the average total cost curve
question
Both competitive and monopolistically competitive firms:
answer
C. can maximize profit by producing to the point where marginal cost = marginal revenue
question
The marginal revenue of a monopolistically competitive firm will always be:
answer
A. less than the price
question
Which of the following best describes the relationship between price and marginal revenue for monopolistic competitors?
answer
D. price is above marginal revenue, as a general rule, regardless of the number of firms in the monopolistically competitive industry
question
If the price that determined where marginal revenue equaled marginal cost were below the bottom of the average variable cost curve, then the profit-maximizing, monopolistically competitive firm would:
answer
D. shut down because it would cost more to produce and sell output than it would to shut down and lose all fixed costs
question
An increase in marginal cost causes a profit-maximizing, monopolistically competitive firm to:
answer
B. raise price and decrease output
question
Profit-maximizing, monopolistically competitive firms:
answer
C. consider only marginal cost and marginal revenue, which determine the level of output---and the level of output determines price
question
If monopolistically competitive firms are making positive economic profits, then new firms would:
answer
E. begin to enter the industry
question
Entry of new firms will continue in a monopolistically competitive industry until:
answer
D. economic profit equals zero
question
The entry of new firms into a monopolistically competitive industry causes the:
answer
D. existing firm's demand curve to shift left
question
The demand curve for a monopolistically competitive firm is downward sloping because of:
answer
B. product differentiation
question
The difference between price and marginal cost is:
answer
D. markup
question
A monopolistically competitive firm usually charges more than a perfectly competitive firm because:
answer
D. producing differentiated output is more expensive than producing homogenous output
question
In a monopolistically competitive industry, price:
answer
E. is most likely a bit higher than the competitive market price because of the cost of variety
question
Perfect competition and monopolistic competition are similar because, under both market structures:
answer
A. there are zero economic profits in the long run
question
A competitive firm would have:
answer
A. more elastic demand than a monopolistically competitive firm
question
Excess capacity best describes the fact that:
answer
A. monopolistically competitive firms produce less than the cost-minimizing level of output
question
Monopolistic competition is inefficient because:
answer
C. price is not equal to the minimum average total cost
question
A monopolistically competitive firm is inefficient because the firm:
answer
D. produces an output where average total cost is not minimum
question
One source of economic inefficiency from monopolistic competition is:
answer
A. markup
question
The concept of markup under monopolistic competition would best be described as the:
answer
E. difference between the marginal cost and the price of the monopolistic competitor
question
Markup would generally be highest under:
answer
A. a monopoly
question
When a perfectly competitive firm or a monopolistically competitive firm is making zero economic profit:
answer
A. the industry is in equilibrium; no firms will want to enter or exit
question
If a monopolistically competitive firm wants to maximize profits, it will increase production until:
answer
E. marginal revenue= marginal cost
question
Product differentiation makes the demand for a monopolistically competitive firm's product:
answer
B. less elastic than in a competitive market
question
Advertising is designed to:
answer
B. decrease the price elasticity of demand for the firm and shift the firm's demand curve rightward
question
Successful advertising:
answer
C. normally causes demand for the firm to shift right
question
Because of successful advertising:
answer
E. the demand curve facing each firm shifts right, while the cost curve shifts upward
question
Successful advertising under monopolistic competition might:
answer
D. reduce the price elasticity of demand for that firm's output
question
When would advertising be least effective?
answer
A. in a perfectly competitive industry
question
Why would perfectly competitive industries advertise even though individual firms do not?
answer
A. even though the output of an individual firm would be considered homogeneous to other firms, the industry output would be differentiated (ex florida oj vs imports)
question
One drawback to advertising might be that it could easily:
answer
A. raise costs but not increase demand
question
Like a pure monopoly, an oligopoly is characterized by:
answer
C. significant barriers to entry
question
________ have a greater incentive to collude and to form cartels in an effort to achieve monopoly-like profits
answer
E. oligopolists
question
A monopolistically competitive market consists of many sellers, an oligopoly consists of _______ seller(s), and a monopoly consists of ________ seller(s)
answer
D. a few; one
question
A monopolistically competitive market consists of _______ seller(s), and oligopoly consists of _______ seller(s), and a monopoly consists of one seller
answer
E. many, a few
question
A firm operating in an oligopolistic market has ________ market power compared to a _______
answer
C. less; monopolist
question
Economists measure oligopoly power present in an industry by using:
answer
B. concentration ratios
question
Oligopolistic markets are _______ because price is ________ marginal cost
answer
E. socially inefficient; greater than
question
When two or more firms form a _______ agreement and set price and quantity in unison, economics refer to them as _______
answer
C. collusive; a cartel
question
When a market is characterized by mutual independence:
answer
D. the actions of one firm have an impact on the price and output of its competitors
question
Assume all markets are in long-run equilibrium. The market quantity supplied in an oligopoly would be _____ the market quantity supplied in a monopoly and ______ the market quantity supplied in a competitive market
answer
E. greater than; less than
question
Assume all markets are in long-run equilibrium. Market price in an oligopoly would be _______ the market price in a monopoly, and _______ the market price in a competitive market
answer
B. less than; greater than
question
When a third firm enters a market that was previously categorized as a duopoly, the equilibrium price:
answer
C. will be lower and the equilibrium quantity will be higher
question
When more firms enter into a market that was previously characterized as a duopoly, it will:
answer
B. be more difficult for firms in the market to form a successful cartel
question
The ______ effect occurs when the market price either decreases or increases by the respective entrance or exit of a rival firm in the market
answer
B. price
question
The two major pieces of antitrust legislation in the United States are the:
answer
B. sherman antitrust act and the clayton act
question
The practice of setting prices deliberately below average variable costs in order to put a rival out of business is known as:
answer
D. predatory pricing
question
Suppose Firm A sets a price below average variable cost for two years. After the second year, Firm A's biggest rival goes bankrupt and exits the market. In the third year, Firm A raises prices significantly. Firm A is practicing:
answer
E. predatory pricing
question
The _______ demand curve theory states that oligopolists tend to respond aggressively to the price cuts of rivals but largely ignore price increases
answer
C. kinked
question
According to the kinked demand curve theory, the behavior of firms in an oligopoly creates a demand curve that is _______ at prices above the cartel price and ________ at prices below the cartel price
answer
E. more elastic; more inelastic

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