ECON 2302 Week 4 Quiz 8

ECON 2302 Week 4 Quiz 8 | Assignment Help | Central Texas College

•             Question 1

                A monopolistically competitive market is characterized by                                           

                a.

long run profits, but not many firms.

                b.

many firms, but not free entry.

                 c.

differentiated products, but not long run profits.

                d.

free entry, but not differentiated products.

•             Question 2

                Free entry and exit means that the number of firms in the market adjusts until                                

                a.

producers continuously enter the market freely.

                b.

the market grows to a profitable level.

                c.

products are free.

                 d.

economic profits are driven to zero.

•             Question 3

                Assume a monopolistically competitive firm encounters a decrease in average variable cost at all output levels. We would expect:                                  

                a.

The price to fall and output to fall

                b.

The price to rise and output to rise

                c.

The price to rise and output to fall

                 d.

The price to fall and output to rise

•             Question 4

                In a monopolistically competitive market,                                            

                 a.

firms can enter or exit the market without restrictions.

                b.

each firm produces a product that is essentially identical to the products of other firms in the market.

                c.

there are only a few sellers.

                d.

each firm takes the price of its product as given.

•             Question 5

                The market for novels is                                              

                a.

perfectly competitive.

                b.

a monopoly.

                 c.

monopolistically competitive.

                d.

an oligopoly.

•             Question 6

                Assume that Samorola has entered into an enforceable resale price maintenance agreement with Trint and U-Mobile. Which of the following will always be true?                                        

                a.

U-Mobile will benefit from customers who go to Trint for information about different mobile phones.

                b.

The wholesale price of Samorolas will be different for Trint than it is for U-Mobile.

                 c.

U-Mobile and Trint will always sell Samorolas for exactly the same price.

                d.

Trint will sell Samorolas at a lower price than U-Mobile.

•             Question 7

                A cooperative agreement among oligopolists is more likely to be maintained,                                    

                a.

the greater the number of oligopolists.

                b.

the smaller the number of buyers of the oligopolists’ product.

                 c.

the more likely it is that the game among the oligopolists will be played over and over again.

                d.

the larger the number of buyers of the oligopolists’ product.

•             Question 8

                An oligopoly would tend to restrict output and drive up price if

Answers:             a.

firms engage in informative advertising.

                 b.

firms collude and behave like a monopoly.

                c.

barriers to entering the industry are negligible.

                d.

firms produce a standardized product.

•             Question 9

                Figure 17-2. Two companies, Acme and Pinnacle, each decide whether to produce a good quality product or a poor quality product. In the figure, the dollar amounts are payoffs and they represent annual profits for the two companies.

Refer to Figure 17-2. Which of the following statements is correct?                                         

Answers:             a.

Our knowledge of game theory suggests that the most likely outcome of the game, if it is played only once, is for one firm to produce a poor quality product and for the other firm to produce a good quality product.

                 b.

Regardless of the strategy pursued by Acme, Pinnacle’s best strategy is to produce a good quality product, and for that reason producing a good quality product is a dominant strategy for Pinnacle.

                c.

Acme can potentially earn its highest possible profit if it produces a good quality product, and for that reason it is a dominant strategy for Acme to produce a good quality product.

                d.

The highest possible combined profit for the two firms occurs when both produce a poor quality product, and for that reason producing a poor quality product is a dominant strategy for both firms.

•             Question 10

                A cooperative agreement among oligopolists is less likely to be maintained,                                       

Answers:             a.

the larger the number of buyers of the oligopolists’ product.

                 b.

the greater the number of oligopolists.

                c.

the smaller the number of buyers of the oligopolists’ product.

                d.

the more likely it is that the game among the oligopolists will be played over and over again.