Econ Exam 2 Chp. 13,14 – Flashcards

1) The key characteristics of a monopolistically competitive market structure include A) few sellers. B) sellers selling similar but differentiated products. C) high barriers to entry. D) sellers acting to maximize revenue.

2) A monopolistically competitive firm will A) charge the same price as its competitors do. B) always produce at the most efficient scale of production. C) have some control over its price because its product is differentiated. D) produce an output level that is productively and allocatively efficient.

3) In San Francisco there are many restaurants that specialize in a wide variety of cuisines. Patronage at these restaurants is influenced by factors such as tastes, price and location. This market is A) perfectly competitive. B) monopolistically competitive. C) oligopolistic. D) monopolistic.

4) Monopolistically competitive firms face a perfectly elastic demand curve

{Hint: it faces a highly but not perfectly elastic demand curve} 5) Firms in monopolistic competition compete by selling similar, but not identical products.

6) A monopolistically competitive industry that earns economic profits in the short run will A) continue to earn economic profits in the long run. B) experience the entry of new rival firms into the industry in the long run. C) experience the exit of existing firms out of the industry in the long run. D) experience a rise in demand in the long run.

7) The financial situation at Starbucks in the late 2000s illustrates the fact that maintaining long-run profits in a monopolistically competitive market is A) impossible. B) very difficult. C) fairly easy. D) almost always guaranteed

8) Is a monopolistically competitive firm productively efficient? A) No, because it does not produce at minimum average total cost. B) Yes, because it produces where marginal cost equals marginal revenue. C) No, because price is greater than marginal cost. D) Yes, because price equals average total cost.

9) Is a monopolistically competitive firm allocatively efficient? A) No, because it does not produce at minimum average total cost. B) Yes, because it produces where marginal cost equals marginal revenue. C) No, because price is greater than marginal cost. D) Yes, because price equals average total cost.

10) Advertisements and experiments with the product varieties are essential parts of monopolistic competitition.

11) Firms earn only normal profit in the long run.

12) An oligopolistic industry is characterized by all of the following except A) existence of entry barriers. B) the possibility of reaping long run economic profits. C) firms pursuing aggressive business strategies, independent of rivals' strategies. D) production of standardized products.

[Hint: the decisions are mutually interdependent to those of the rivals] 13) Which of the following is the best example of an oligopolistic industry? A) the beef market B) the pharmaceutical industry C) consumers energy D) the beauty products industry

14) A four-firm concentration ratio measures A) the fraction of an industry's sales accounted for by the four largest firms. B) the production of any four firms in an industry. C) how the four largest firms became so concentrated. D) the fraction of employment of the four largest firms in an industry.

15) The share of four largest firms needs to be above 40% of the total market share by all firms for the market to be considered oligopolistic.

16) Unlike monopolistic competition, firms under oligopoly can keep profit in the long run.

17) Oligopoly is neither productively, nor allocatively efficient.

18) Game theoretic models are used to describe profit maximization under different oligopoly situations.

19) Oligolists produce either same (like oil companies) or differentiated (some pharmaceuticals) products.

20) Traditionally oligopoly characterizes collusion among large firms to gain more market power.

8) Is a monopolistically competitive firm productively efficient? A) No, because it does not produce at minimum average total cost. B) Yes, because it produces where marginal cost equals marginal revenue. C) No, because price is greater than marginal cost. D) Yes, because price equals average total cost.

9) Is a monopolistically competitive firm allocatively efficient? A) No, because it does not produce at minimum average total cost. B) Yes, because it produces where marginal cost equals marginal revenue. C) No, because price is greater than marginal cost. D) Yes, because price equals average total cost.

10) Advertisements and experiments with the product varieties are essential parts of monopolistic competitition.

11) Firms earn only normal profit in the long run.

12) An oligopolistic industry is characterized by all of the following except A) existence of entry barriers. B) the possibility of reaping long run economic profits. C) firms pursuing aggressive business strategies, independent of rivals' strategies. D) production of standardized products.

[Hint: the decisions are mutually interdependent to those of the rivals] 13) Which of the following is the best example of an oligopolistic industry? A) the beef market B) the pharmaceutical industry C) consumers energy D) the beauty products industry

14) A four-firm concentration ratio measures A) the fraction of an industry's sales accounted for by the four largest firms. B) the production of any four firms in an industry. C) how the four largest firms became so concentrated. D) the fraction of employment of the four largest firms in an industry.

15) The share of four largest firms needs to be above 40% of the total market share by all firms for the market to be considered oligopolistic.

16) Unlike monopolistic competition, firms under oligopoly can keep profit in the long run.

17) Oligopoly is neither productively, nor allocatively efficient.

18) Game theoretic models are used to describe profit maximization under different oligopoly situations.

8) Is a monopolistically competitive firm productively efficient? A) No, because it does not produce at minimum average total cost. B) Yes, because it produces where marginal cost equals marginal revenue. C) No, because price is greater than marginal cost. D) Yes, because price equals average total cost.

9) Is a monopolistically competitive firm allocatively efficient? A) No, because it does not produce at minimum average total cost. B) Yes, because it produces where marginal cost equals marginal revenue. C) No, because price is greater than marginal cost. D) Yes, because price equals average total cost.

10) Advertisements and experiments with the product varieties are essential parts of monopolistic competitition.

11) Firms earn only normal profit in the long run.

12) An oligopolistic industry is characterized by all of the following except A) existence of entry barriers. B) the possibility of reaping long run economic profits. C) firms pursuing aggressive business strategies, independent of rivals' strategies. D) production of standardized products.

[Hint: the decisions are mutually interdependent to those of the rivals] 13) Which of the following is the best example of an oligopolistic industry? A) the beef market B) the pharmaceutical industry C) consumers energy D) the beauty products industry

14) A four-firm concentration ratio measures A) the fraction of an industry's sales accounted for by the four largest firms. B) the production of any four firms in an industry. C) how the four largest firms became so concentrated. D) the fraction of employment of the four largest firms in an industry.

8) Is a monopolistically competitive firm productively efficient? A) No, because it does not produce at minimum average total cost. B) Yes, because it produces where marginal cost equals marginal revenue. C) No, because price is greater than marginal cost. D) Yes, because price equals average total cost.

9) Is a monopolistically competitive firm allocatively efficient? A) No, because it does not produce at minimum average total cost. B) Yes, because it produces where marginal cost equals marginal revenue. C) No, because price is greater than marginal cost. D) Yes, because price equals average total cost.

10) Advertisements and experiments with the product varieties are essential parts of monopolistic competitition.

11) Firms earn only normal profit in the long run.

8) Is a monopolistically competitive firm productively efficient? A) No, because it does not produce at minimum average total cost. B) Yes, because it produces where marginal cost equals marginal revenue. C) No, because price is greater than marginal cost. D) Yes, because price equals average total cost.