Question 1

When a monopolistically competitive firm cuts its price to increase its sales,it experiences a loss in revenue due to the

Accepted Answer

A)  substitution effect.
B)  income effect.
C)  price effect.
D)  output effect.E) All of the above
F) A) and C)

Question 2

Which of the following economists did not help to develop game theory analysis?

Accepted Answer

A)  Adam Smith
B)  John Nash
C)  John von Neumann
D)  Oskar MorgensternE) A) and B)
F) C) and D)

Question 3

Central Grocery in New Orleans is famous for its muffaletta,a large round sandwich filled with deli meats and topped with a tangy olive salad.Suppose the following table represents cost and revenue data for Central Grocery.
 \(\begin{array}{|c|c|c|c|c|c|c|c|}
\hline\begin{array}{c}
\text { Muffaletta } \
\text { s Sold per } \
\text { Day }
\end{array} & \begin{array}{c}
\text { Price } \
(P)
\end{array} & \begin{array}{c}
\text { Total } \
\text { Revenue } \
(T R)
\end{array} & \begin{array}{c}
\text { Marginal } \
\text { Revenue } \
(M R)
\end{array} & \begin{array}{c}
\text { Total } \
\text { Cost } \
(T C)
\end{array} & \begin{array}{c}
\text { Marginal } \
\text { Cost }(M C)
\end{array} & \begin{array}{c}
\text { Average } \
\text { Total } \
\text { Cost } \
(A T C)
\end{array} & \text { Profit } \
\hline 0 & \$ 15 & \$ 0 & \cdots & \$ 12 & \cdots & \cdots & -\$ 12 \
\hline 1 & 14 & 14 & \$ 14 & 18 & \$ 6 & \$ 18.00 & -4 \
\hline 2 & 13 & 26 & 12 & 20 & 2 & 10.00 & 6 \
\hline 3 & 12 & 36 & 10 & 21 & 1 & 7.00 & 15 \
\hline 4 & 11 & 44 & 8 & 23 & 2 & 5.75 & 21 \
\hline 5 & 10 & 50 & 6 & 26 & 3 & 5.20 & 24 \
\hline 6 & 9 & 54 & 4 & 30 & 4 & 5.00 & 24 \
\hline 7 & 8 & 56 & 2 & 35 & 5 & 5.00 & 21 \
\hline 8 & 7 & 56 & 0 & 42 & 7 & 5.25 & 14 \
\hline 9 & 6 & 54 & -2 & 52 & 10 & 5.70 & 2 \
\hline 10 & 5 & 50 & -4 & 78 & 16 & 7.80 & -28 \
\hline
\end{array}\) 
Illustrate this data by graphing the demand,MR,MC,and ATC curves.Identify the profit-maximizing price and quantity,and show the area representing the total profit received by Central Grocery.

Accepted Answer

The answer of Central Grocery in New Orleans is famous...

Question 4

In what way does long-run equilibrium under monopolistic competition differ from long-run equilibrium under perfect competition?

Accepted Answer

A)  Firms in perfect competition achieve productive and allocative efficiency while firms in monopolistic competition achieve neither allocative nor productive efficiency.
B)  The only difference is that in a monopolistically competitive market there are many brands to choose from while in a perfectly competitive market there is one standard product.
C)  Firms in perfect competition achieve productive efficiency while firms in monopolistic competition achieve allocative efficiency.
D)  Firms in perfect competition achieve allocative efficiency while firms in monopolistic competition achieve brand efficiency.E) A) and B)
F) B) and C)

Question 5

Since 1972,the world price of oil has been largely determined by OPEC,which controls about 75 percent of the world's proven oil reserves.Since 1972 the price of oil has

Accepted Answer

A)  fluctuated.OPEC's situation is an example of a prisoner's dilemma.
B)  risen slowly, but steadily.Members of OPEC fear that if they raise the price of oil too quickly this will lead oil-buying nations to accuse OPEC of price gouging, which is illegal under international law.
C)  steadily fallen through the 1970s, then risen continually in the years since then.OPEC's actions are an example of implicit collusion.
D)  been tied by OPEC to the rate of inflation in the United States.If, for example, the rate of inflation is 5 percent in one year, OPEC will raise the price of oil by 5 percent the next year.E) None of the above
F) A) and D)

Question 6

Explain the differences between total revenue,average revenue,and marginal revenue.

Accepted Answer

Total revenue equals price × q...

Question 7

Collusion occurs when

Accepted Answer

A)  a firm chooses a level of output to maximize its own profit.
B)  two firms' price and output decisions come into conflict.
C)  there is an agreement among firms to charge the same price or otherwise not to compete.
D)  firms refuse to follow their price leaders.E) B) and D)
F) B) and C)

Question 8

Table 11-7
   Wal-Mart’s (W)  Choices  Target’s (T)  Choices  High Price  Low price  High Price  W: $10,000 profit  T: $10,000 profit  W: $5,000 profit  T: $14,000 profit  Low price  W: $14,000 profit  T: $5,000 profit  W: $7,000 profit  T: $7,000 profit \begin{array}{c}	ext { Wal-Mart&#x27;s (W)  Choices }\	ext { Target&#x27;s (T)  Choices }\begin{array}{|c|c|c|} \hline&{	ext { High Price }} & {	ext { Low price }} \\hline {	ext { High Price }} & \begin{array}{l}	ext { W: } \$ 10,000 	ext { profit } \	ext { T: } \$ 10,000 	ext { profit }\end{array} & \begin{array}{l}	ext { W: } \$ 5,000 	ext { profit } \	ext { T: } \$ 14,000 	ext { profit }\end{array} \\hline {	ext { Low price }} & \begin{array}{l}	ext { W: } \$ 14,000 	ext { profit } \	ext { T: } \$ 5,000 	ext { profit }\end{array} & \begin{array}{l}	ext { W: } \$ 7,000 	ext { profit } \	ext { T: } \$ 7,000 	ext { profit }\\end{array}\end{array}\end{array} Wal-Mart’s (W)  Choices  Target’s (T)  Choices  High Price  Low price ​ High Price  W: $10,000 profit  T: $10,000 profit ​ W: $14,000 profit  T: $5,000 profit ​​ Low price  W: $5,000 profit  T: $14,000 profit ​ W: $7,000 profit  T: $7,000 profit ​​​​  
Table 11-7 shows the payoff matrix for Wal-Mart and Target from every combination of pricing strategies for the popular PlayStation 3.At the start of the game each firm charges a low price and each earns a profit of $7,000.
-Refer to Table 11-7.Suppose Wal-Mart and Target both advertise that they will match the lowest price offered by any competitor.What is the purpose of such a strategy?

Accepted Answer

A)  to signal to each other not to charge below the current low price
B)  to signal to each other that they will not hesitate to initiate a price war
C)  to signal to each other that they intend to charge the high price
D)  to signal to each other to share the market equally E) B) and C)
F) B) and D)

Question 9

In the long run,what happens to the demand curve facing a monopolistically competitive firm that is earning short-run profits?

Accepted Answer

A)  The demand curve will shift to the left and became more elastic.
B)  The demand curve will shift to the left and became less elastic.
C)  The demand curve will shift to the right and became more elastic.
D)  The demand curve will shift to the right and became less elastic.E) None of the above
F) B) and C)

Question 10

A study conducted by economists at the University of Chicago found that when Southwest Airlines begins flying a new route,ticket prices on other airlines for that route ________,indicating that airlines ________.

Accepted Answer

A)  stay relatively unchanged; may begin practicing implicit price collusion when Southwest enters a market
B)  drop by an average of 29 percent; may have been practicing implicit price collusion before Southwest's entry into the market
C)  rise by an average of 65 percent; know they can practice implicit price collusion once Southwest announces it is entering a market.
D)  first drop and then rise back to their original levels; temporarily stop practicing implicit price collusion until Southwest becomes established, then return to their collusive pricing strategiesE) A) and B)
F) None of the above

Question 11

A cooperative equilibrium results when firms

Accepted Answer

A)  choose the best strategy regardless of what other players do.
B)  choose the strategy that maximizes the total game payoff.
C)  choose the strategy that minimizes the payoff to other players.
D)  choose a strategy by random chance.E) C) and D)
F) A) and C)

Question 12

Which industry has the highest four-firm concentration ratio?

Accepted Answer

A)  discount department stores
B)  college bookstores
C)  retail gasoline stations
D)  cigarettesE) None of the above
F) B) and D)

Question 13

An agreement among firms to charge the same price or otherwise not to compete is called

Accepted Answer

A)  a pay-off matrix.
B)  a subgame-perfect equilibrium.
C)  a Nash equilibrium.
D)  collusion.E) C) and D)
F) All of the above

Question 14

Table 11-9
   Alistair’s (A)  Choices  Baine’s (B)  Choices  Increase  advertising  budget  Leave  advertising  budget as is  Increase advertising  budget  A: $30,000 profit  B: $30,000 profit  A: $10,000 profit  B: $50,000 profit  Leave advertising  budget as is  A: $50,000 profit  B: $10,000 profit  A: $40,000 profit  B: $40,000 profit \begin{array}{c}	ext { Alistair&#x27;s (A)  Choices }\	ext { Baine&#x27;s (B)  Choices }\begin{array}{|c|c|c|}\hline & \begin{array}{c}	ext { Increase } \	ext { advertising } \	ext { budget }\end{array} & \begin{array}{c}	ext { Leave } \	ext { advertising } \	ext { budget as is }\end{array} \\hline \begin{array}{c}	ext { Increase advertising } \	ext { budget }\end{array} & \begin{array}{c}	ext { A: } \$ 30,000 	ext { profit } \	ext { B: } \$ 30,000 	ext { profit }\end{array} & \begin{array}{c}	ext { A: } \$ 10,000 	ext { profit } \	ext { B: } \$ 50,000 	ext { profit }\end{array} \\hline \begin{array}{c}	ext { Leave advertising } \	ext { budget as is }\end{array} & \begin{array}{c}	ext { A: } \$ 50,000 	ext { profit } \	ext { B: } \$ 10,000 	ext { profit }\end{array} & \begin{array}{c}	ext { A: } \$ 40,000 	ext { profit } \	ext { B: } \$ 40,000 	ext { profit }\end{array} \\hline\end{array}\end{array} Alistair’s (A)  Choices  Baine’s (B)  Choices  Increase advertising  budget ​ Leave advertising  budget as is ​​ Increase  advertising  budget ​ A: $30,000 profit  B: $30,000 profit ​ A: $50,000 profit  B: $10,000 profit ​​ Leave  advertising  budget as is ​ A: $10,000 profit  B: $50,000 profit ​ A: $40,000 profit  B: $40,000 profit ​​​​  
Alistair Luggage and Baine Baggage are the only firms selling luggage in the upscale town of Montecito. Each firm must decide on whether to increase its advertising spending to compete for customers.If one firm increases its advertising budget but the other does not, then the firm with the higher advertising budget will increase its profit. Table 11-9 shows the payoff matrix for this advertising game.
-Refer to Table 11-9.Does Baine have a dominant strategy and if so,what is it?

Accepted Answer

A)  Yes, Baine should increase its advertising budget.
B)  Yes, Baine should keep its advertising budget as is.
C)  There are two dominant strategies: if Alistair increases its advertising budget, then Baine's best bet is to keep its budget the same but if Alistair does not increase its spending then Baine should raise its advertising budget.
D)  No, there is no dominant strategy. E) A) and B)
F) A) and D)

Question 15

Table 11-6
   Godrickporter’s (G)  Choices  Star Connections’ (S)  Choices  Increase  advertising  budget  Leave  advertising  budget as is  Increase advertising  budget G:$16,000 profit S:$8,000 profit G:$12,000 profit S:$15,000 profit  Leave advertising  budget as is G:$8,000 profit S:$10,000 profit G:$6,000 profit S:$12,000 profit \begin{array}{c} \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad	ext { Godrickporter&#x27;s (G)  Choices }\	ext { Star Connections&#x27; (S)  Choices }\begin{array}{|c|c|c|}\hline & {\begin{array}{c}	ext { Increase } \	ext { advertising } \	ext { budget }\end{array}} & {\begin{array}{c}	ext { Leave } \	ext { advertising } \	ext { budget as is }\end{array}} \\hline \begin{array}{c}	ext { Increase advertising } \	ext { budget }\end{array} & \begin{array}{c}\mathrm{G}: \$ 16,000 	ext { profit } \\mathrm{S}: \$ 8,000 	ext { profit }\end{array} & \begin{array}{c}\mathrm{G}: \$ 12,000 	ext { profit } \\mathrm{S}: \$ 15,000 	ext { profit }\end{array} \\hline \begin{array}{c}	ext { Leave advertising } \	ext { budget as is }\end{array} & \begin{array}{l}\mathrm{G}: \$ 8,000 	ext { profit } \\mathrm{S}: \$ 10,000 	ext { profit }\end{array} & \begin{array}{l}\mathrm{G}: \$ 6,000 	ext { profit } \\mathrm{S}: \$ 12,000 	ext { profit }\end{array} \\hline\end{array}\end{array} Godrickporter’s (G)  Choices  Star Connections’ (S)  Choices  Increase advertising  budget ​ Leave advertising  budget as is ​​ Increase  advertising  budget ​G:$16,000 profit S:$8,000 profit ​G:$8,000 profit S:$10,000 profit ​​ Leave  advertising  budget as is ​G:$12,000 profit S:$15,000 profit ​G:$6,000 profit S:$12,000 profit ​​​​  
Godrickporter and Star Connections are the only two airport shuttle and limousine rental service companies in the mid-sized town of Godrick Hollow. Each firm must decide on whether to increase its advertising spending to compete for customers. Table 11-6 shows the payoff matrix for this advertising game.
-Refer to Table 11-6.Is there a dominant strategy for Star Connections and if so,what is it?

Accepted Answer

A)  No, its outcome depends on what Godrickporter does.
B)  Yes, Star Connections should increase its advertising spending.
C)  Yes, Star Connections should reduce its advertising spending.
D)  Yes, Star Connections' dominant strategy is to collude with Godrickporter. E) A) and B)
F) A) and C)

Question 16

Table 11-3
   Quantity  Price  (dollars)   Total Revenue  (dollars)   Total Variable  Cost  (dollars)   Total Cost  (dollars)  0$21$0$0$50120201666219383181318544595417685910951680751256159093143714981121628131041401909121081802301011110230280\begin{array} { | c | c | c | c | c | } \hline 	ext { Quantity } & \begin{array} { c } 	ext { Price } \	ext { (dollars)  }\end{array} & \begin{array} { c } 	ext { Total Revenue } \	ext { (dollars)  }\end{array} & \begin{array} { c } 	ext { Total Variable } \	ext { Cost } \	ext { (dollars)  }\end{array} & \begin{array} { c } 	ext { Total Cost } \	ext { (dollars)  }\end{array} \\hline 0 & \$ 21 & \$ 0 & \$ 0 & \$ 50 \\hline 1 & 20 & 20 & 16 & 66 \\hline 2 & 19 & 38 & 31 & 81 \\hline 3 & 18 & 54 & 45 & 95 \\hline 4 & 17 & 68 & 59 & 109 \\hline 5 & 16 & 80 & 75 & 125 \\hline 6 & 15 & 90 & 93 & 143 \\hline 7 & 14 & 98 & 112 & 162 \\hline 8 & 13 & 104 & 140 & 190 \\hline 9 & 12 & 108 & 180 & 230 \\hline 10 & 11 & 110 & 230 & 280 \\hline\end{array} Quantity 012345678910​ Price  (dollars)  ​$2120191817161514131211​ Total Revenue  (dollars)  ​$020385468809098104108110​ Total Variable  Cost  (dollars)  ​$0163145597593112140180230​ Total Cost  (dollars)  ​$50668195109125143162190230280​​  
Table 11-3 shows the demand and cost schedules for a monopolistically competitive firm.
-Refer to Table 11-3.What is its average variable cost of production at its optimal output level?

Accepted Answer

A)  $0 (because its optimal output =0) 
B)  $15
C)  $14.75
D)  $29 E) B) and C)
F) None of the above

Question 17

Which of the following statements about the prisoner's dilemma is false?

Accepted Answer

A)  The prisoner's dilemma in a one-shot game leads to a noncooperative, equilibrium outcome.
B)  The prisoner's dilemma in repeated games could lead to cooperation especially if there is some enforcement mechanism that punishes a player who does not cooperate.
C)  Players caught in a prisoner's dilemma act in selfish ways that lead to an equilibrium that is sub-optimal.
D)  The prisoner's dilemma game can never reach a Nash equilibrium as long as players do not cooperate.E) B) and D)
F) A) and B)

Question 18

Which of the following is not a characteristic of long-run equilibrium in a monopolistically competitive market?

Accepted Answer

A)  Selling price equals average total cost.
B)  Production is at minimum average total cost.
C)  Marginal revenue equals marginal cost.
D)  Selling price is greater than marginal cost.E) B) and D)
F) A) and B)

Question 19

A monopolistically competitive firm that is earning profits will,in the long run,experience all of the following except

Accepted Answer

A)  new rivals entering the market.
B)  a decrease in demand for its product.
C)  demand for the firm's product becomes more elastic.
D)  a decrease in the number of rival products.E) C) and D)
F) None of the above

Question 20

Table 11-10
   Ming  Henri  offers free pickup  and delivery  does not offer free pickup  and delnvery  offers free pickup  and delivery  Ming $20,000 Henri: $50,000 Ming $10,000 Henri $25,000 does not offer free pickup  and delivery  Ming $30,000 Henri: $40,000 Ming $15,000 Henri $45,000\begin{array}{c}	ext { Ming }\	ext { Henri }\begin{array}{|l|l|l|}\hline & \begin{array}{l}	ext { offers free pickup } \	ext { and delivery }\end{array} & \begin{array}{l}	ext { does not offer free pickup } \	ext { and delnvery }\end{array} \\hline \begin{array}{l}	ext { offers free pickup } \	ext { and delivery }\end{array} & \begin{array}{l}	ext { Ming } \$ 20,000 \	ext { Henri: } \$ 50,000\end{array} & \begin{array}{l}	ext { Ming } \$ 10,000 \	ext { Henri } \$ 25,000\end{array} \\hline \begin{array}{l}	ext { does not offer free pickup } \	ext { and delivery }\end{array} & \begin{array}{l}	ext { Ming } \$ 30,000 \	ext { Henri: } \$ 40,000\end{array} & \begin{array}{l}	ext { Ming } \$ 15,000 \	ext { Henri } \$ 45,000\end{array} \\hline\end{array}\end{array} Ming  Henri  offers free pickup  and delivery ​ does not offer free pickup  and delivery ​​ offers free pickup  and delivery ​ Ming $20,000 Henri: $50,000​ Ming $30,000 Henri: $40,000​​ does not offer free pickup  and delnvery ​ Ming $10,000 Henri $25,000​ Ming $15,000 Henri $45,000​​​​  
Ming and Henri each run one of the two dry cleaning facilities in the town of Scaraby.Both consider offering free pickup and delivery services. Table 11-10 shows the payoff matrix containing the expected quarterly profits for each firm.
-Refer to Table 11-10.Does Ming have a dominant strategy? If yes,what is it?

Accepted Answer

A)  Yes, Ming's dominant strategy is to offer free pickup and delivery.
B)  No, Ming does not a dominant strategy - his best outcome depends on what Henri does.
C)  Yes, Ming's dominant strategy is to not to offer free pickup and delivery.
D)  Yes, Ming's dominant strategy is to wait to see what Henri does first. E) All of the above
F) A) and B)

Exam 11: Monopolistic Competition and Oligopoly

Which of the following is not a characteristic of long-run equilibrium in a monopolistically competitive market?

Correct Answer
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Correct Answer
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Since 1972,the world price of oil has been largely determined by OPEC,which controls about 75 percent of the world's proven oil reserves.Since 1972 the price of oil has

Correct Answer
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Correct Answer
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A cooperative equilibrium results when firms

Correct Answer
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Correct Answer
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In the long run,what happens to the demand curve facing a monopolistically competitive firm that is earning short-run profits?

Correct Answer
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Which of the following statements about the prisoner's dilemma is false?

Correct Answer
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Which industry has the highest four-firm concentration ratio?

Correct Answer
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Correct Answer
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Correct Answer
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A study conducted by economists at the University of Chicago found that when Southwest Airlines begins flying a new route,ticket prices on other airlines for that route ,indicating that airlines .

Correct Answer
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Explain the differences between total revenue,average revenue,and marginal revenue.

Correct Answer
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Total revenue equals price × q...
View Answer

When a monopolistically competitive firm cuts its price to increase its sales,it experiences a loss in revenue due to the

Correct Answer
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Collusion occurs when

Correct Answer
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An agreement among firms to charge the same price or otherwise not to compete is called

Correct Answer
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A monopolistically competitive firm that is earning profits will,in the long run,experience all of the following except

Correct Answer
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Correct Answer
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Which of the following economists did not help to develop game theory analysis?

Correct Answer
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In what way does long-run equilibrium under monopolistic competition differ from long-run equilibrium under perfect competition?

Correct Answer
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Exam 11: Monopolistic Competition and Oligopoly

Which of the following is not a characteristic of long-run equilibrium in a monopolistically competitive market?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Since 1972,the world price of oil has been largely determined by OPEC,which controls about 75 percent of the world's proven oil reserves.Since 1972 the price of oil has

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A cooperative equilibrium results when firms

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

In the long run,what happens to the demand curve facing a monopolistically competitive firm that is earning short-run profits?

Correct AnswerverifiedShow Answer

Which of the following statements about the prisoner's dilemma is false?

Correct AnswerverifiedShow Answer

Which industry has the highest four-firm concentration ratio?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A study conducted by economists at the University of Chicago found that when Southwest Airlines begins flying a new route,ticket prices on other airlines for that route ________,indicating that airlines ________.

Correct AnswerverifiedShow Answer

Explain the differences between total revenue,average revenue,and marginal revenue.

Correct AnswerverifiedTotal revenue equals price × q...View AnswerShow Answer

When a monopolistically competitive firm cuts its price to increase its sales,it experiences a loss in revenue due to the

Correct AnswerverifiedShow Answer

Collusion occurs when

Correct AnswerverifiedShow Answer

An agreement among firms to charge the same price or otherwise not to compete is called

Correct AnswerverifiedShow Answer

A monopolistically competitive firm that is earning profits will,in the long run,experience all of the following except

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following economists did not help to develop game theory analysis?

Correct AnswerverifiedShow Answer

In what way does long-run equilibrium under monopolistic competition differ from long-run equilibrium under perfect competition?

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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A study conducted by economists at the University of Chicago found that when Southwest Airlines begins flying a new route,ticket prices on other airlines for that route ,indicating that airlines .

Correct Answer
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Correct Answer
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Total revenue equals price × q...
View Answer

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