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Choose The Best Answers:
1. Which of the following is true for both monopoly and pure competition?
a) there is no market supply curve
b) economic profits lead additional firms to enter
c) in equilibrium price is equal to marginal cost
d) in equilibrium marginal revenue is equal to marginal cost
2. The output of a price discriminating monopoly will be:
a) less than a single price monopoly
b) more than a single price monopoly
c) more than a perfectly competitive industry
d) less than an oligopolistic industry
3. Which of the following is true of an industry which is a natural monopoly?
a) average cost is constant
b) total cost varies inversely with output
c) marginal cost is everywhere less than average cost
d) marginal cost is everywhere greater than average cost
4. Which of the following must be true?
a) a monopolist will never produce beyond the output level at which the marginal revenue curve intersects the horizontal axis
b) a monopolist with variable costs will want to produce the output level at which the marginal revenue curve intersects the horizontal axis because that is where total revenues are at their highest.
c) a monopolist seeks to produce that output at which the demand curve is the greatest vertical distance above the marginal cost curve
d) the monopolist has declining average costs
5. According to the kinked demand curve theory of oligopoly, at the quantity corresponding to the kink the firm's:
a) average cost curve is discontinuous
b) marginal cost curve is discontinuous
c) average revenue curve is discontinuous
d) marginal revenue curve is discontinuous
6. If the firms of an industry form a cartel, then:
a) they will collectively increase output and thereby earn higher profits
b) they will cut back on output and raise the price of their product to earn higher profits
c) they will maintain a constant level of output but increase price to earn higher profits
d) they will maintain a constant price level but increase output to earn higher profits
7. The Prisoner's Dilemma illustrates a case where:
a) individually rational behavior leads to a collectively efficient outcome
b) irrational individual behavior actually maximizes joint welfare
c) irrational behavior lowers individual welfare
d) individually rational behavior leads to a collectively inefficient outcome
8. Which of the following is not true of the Hotelling model considered in class?
a) firms will locate near each other
b) firms compete on the basis of location
c) the equilibrium location of firms is socially optimal
d) firms compete to gain market share
9. One difference between oligopoly and monopolistic competition is that:
a) a monopolistically competitive industry has fewer firms
b) in monopolistic competition, the products are identical
c) monopolistic competition has barriers to entry
d) fewer firms compete in oligopolies than in monopolistic competition
10. A monopolistically competitive industry has:
a) significant barriers to entry
b) differentiated products
c) mutually dependent firms
d) a small number of large firms
1. Which of the following is true for both monopoly and pure competition?
a) there is no market supply curve
b) economic profits lead additional firms to enter
c) in equilibrium price is equal to marginal cost
d) in equilibrium marginal revenue is equal to marginal cost
2. The output of a price discriminating monopoly will be:
a) less than a single price monopoly
b) more than a single price monopoly
c) more than a perfectly competitive industry
d) less than an oligopolistic industry
3. Which of the following is true of an industry which is a natural monopoly?
a) average cost is constant
b) total cost varies inversely with output
c) marginal cost is everywhere less than average cost
d) marginal cost is everywhere greater than average cost
4. Which of the following must be true?
a) a monopolist will never produce beyond the output level at which the marginal revenue curve intersects the horizontal axis
b) a monopolist with variable costs will want to produce the output level at which the marginal revenue curve intersects the horizontal axis because that is where total revenues are at their highest.
c) a monopolist seeks to produce that output at which the demand curve is the greatest vertical distance above the marginal cost curve
d) the monopolist has declining average costs
5. According to the kinked demand curve theory of oligopoly, at the quantity corresponding to the kink the firm's:
a) average cost curve is discontinuous
b) marginal cost curve is discontinuous
c) average revenue curve is discontinuous
d) marginal revenue curve is discontinuous
6. If the firms of an industry form a cartel, then:
a) they will collectively increase output and thereby earn higher profits
b) they will cut back on output and raise the price of their product to earn higher profits
c) they will maintain a constant level of output but increase price to earn higher profits
d) they will maintain a constant price level but increase output to earn higher profits
7. The Prisoner's Dilemma illustrates a case where:
a) individually rational behavior leads to a collectively efficient outcome
b) irrational individual behavior actually maximizes joint welfare
c) irrational behavior lowers individual welfare
d) individually rational behavior leads to a collectively inefficient outcome
8. Which of the following is not true of the Hotelling model considered in class?
a) firms will locate near each other
b) firms compete on the basis of location
c) the equilibrium location of firms is socially optimal
d) firms compete to gain market share
9. One difference between oligopoly and monopolistic competition is that:
a) a monopolistically competitive industry has fewer firms
b) in monopolistic competition, the products are identical
c) monopolistic competition has barriers to entry
d) fewer firms compete in oligopolies than in monopolistic competition
10. A monopolistically competitive industry has:
a) significant barriers to entry
b) differentiated products
c) mutually dependent firms
d) a small number of large firms