ECON 150 Chp. 13 Extra Credit

Unlock all answers in this set

Unlock answers
question
Entry of new firms into monopolistically competitive is relatively easy because
answer
Capital requirements are low
question
_________ __________ is a market characterized by having many sellers, differentiated products, and with ease of entry and exit from an industry.
answer
Monopolistic competition
question
A(n) _______ is a market dominated by a few large producers of a homogeneous or differentiated product.
answer
Oligopoly
question
A monopolistically competitive firm's demand curve is
answer
highly but not perfectly elastic
question
A good way to describe _______ competition is that it mixes a small amount of monopoly power with a large amount of competition, while _______ blends a large amount of monopoly power, a small amount of competition through entry, and considerable rivalry among firms.
answer
Monopoly Oligopoly
question
When plant and equipment are underused because firms are producing less than minimum-ATC output, this is known as having _____ ______.
answer
Excess capacity Productive inefficiency
question
Oligopolies have
answer
fewer firms than monopolistic competition
question
If a monopolistically competitive firm is producing where its marginal revenue is less than its marginal cost, then the firm
answer
should produce less output to increase profits or reduce losses.
question
To achieve economic efficiency that reduces the number of resources used but increases the number of socially optimal outputs requires a triple equality. The three components that must be equal are which of the following? Price Marginal cost Average variable cost Average fixed cost Minimum average total cost Minimum marginal revenue
answer
Price Marginal cost Minimum average total cost
question
In the long run, if a monopolistically competitive firm is earning normal profits (breaking even), then it should
answer
Not exit the industry because both explicit and implicit costs are covered.
question
Firms in monoplistic competition produce goods with
answer
Slightly varying physical characteristics Varying degrees of customer service
question
The equality of price and minimum average total cost yields technical _____ efficiency; the equality of price and marginal cost yields ______ efficiency.
answer
Productive Allocative
question
When measuring industry concentration, the four-firm concentration ratio is the percentage ratio of total industry _______ for the four largest firms in an industry relative to total industry sales.
answer
Sales
question
Which of the following is not an example of how products can differ in terms of service? Some stores may charge different prices. The workers in some stores may be more courteous. Some stores may provide faster service. The clerks in some store may be more helpful. Some stores may have a better exchange policy.
answer
Some stores may charge different prices.
question
Barriers to entry into an oligopoly most resemble those of a:
answer
Pure monopoly
question
Oligopolies typically are not desirable because they
answer
Do not achieve allocative efficiency because their price exceeds marginal cost.
question
When four or five auto parts stores serve a medium-sized town this can be considered a(n)
answer
Oligopoly
question
An oligopolistic firm's marginal revenue curve is made up of two segments if:
answer
its rivals match a price cut but ignore a price increase
question
Which of the following are typical characteristics of monoplistic competition? Few firms No collusion Small market share Mutual interdependence Independent
answer
No collusion Small market share Independent
question
Non-______ competition is competition illustrated through product differentiation and advertising.
answer
Price
question
Three models used to study pricing and output by oligopolies are
answer
Price leadership model Kinked-demand curve model Collusive pricing model
question
It is reasonable to assume that the demand of a non-colluding oligopolist facing a kinked-demand curve is less _____ or even _____ below the going price.
answer
Elastic Inelastic
question
Oligopolistic behavior implies that oligopolists prefer competition
answer
Through advertising Through product development
question
The benefits to oligopolists from collusion are:
answer
It possibly prohibits the entry of new rivals It reduces price uncertainty It increases profits
question
Which of the following best exemplifies a firm with excess capacity? A convenience store with all its gas pumps in use and customers waiting to gas. A fast-food restaurant where customers never have to wait to place an order. An auto plant running three full shifts per day to meet customer orders. A hotel with no rooms for the night.
answer
A fast-food restaurant where customers never have to wait to place an order.
question
When firms in an oligopoly _______, their payoffs will be greater than if they did not.
answer
Collude
question
A monopolistically competitive firm's demand curve is
answer
Highly but not perfectly elastic
question
Advertising increases efficiency by
answer
Lowering search costs for consumers. Facilitating the introduction of new products
question
By changing their advertising and _______ strategies, firms competing in an oligopoly can affect profits and influence the profits of rivals.
answer
Pricing
question
A type of implicit understanding used by oligopolists to coordinate prices without engaging in outright collusion is known as ______ _____.
answer
Price leadership
question
Entry to and exit from monopolistically competitive industries is
answer
Relatively easy
question
Firms in monoplistic competition produce goods with:
answer
Slightly varying physical characteristics Varying degrees of customer service
question
In long-run equilibrium, monopolistically competitive firms
answer
Will just break even and will make no economic profit
question
_________ means illegal cooperation with rivals.
answer
Collusion
question
Product differentiation is when the goods sold by the firms in an industry
answer
Have different qualities
question
How do price leaders make price adjustments?
answer
By establishing a price that discourages new entrants into the industry. Infrequently, due to the uncertainty in rivals' response to the these price changes. By communicating impending price adjustments to the industry.
question
The study of how people behave in strategic situations is called ______ ______.
answer
Game theory
question
During macroeconomic instability, the lack of determination of price rigidity is best described by:
answer
The short comings of the kinked-demand curve of oligopolistic firms
question
Multiple models are used to study oligopolies because oligopolies
answer
Cannot estimate both their demand and marginal revenue curves due to rivals' reactions. Encompass a greater range and diversity of market situations.
question
Allocative efficiency in monopolistically competitive markets does not occur in the long run because firms will set the price where
answer
ATC= demand to obtain a normal profit as consumers demand more of that product and forgo other products reducing optimal societal output.
question
Compared to pure monopolies, oligopolies
answer
may be less desirable because they are not regulated by government to protect consumers.
question
When the ______ is stable, oligopoly prices tend to be stable.
answer
Economy
question
For a business to secure a convenient store location even if it means higher prices and less selection is a form of
answer
Product differentiation
question
When members of an oligopoly react to price changes by a dominant firm, the ______ ______ model is most applicable.
answer
Price leadership
question
When firms in an oligopoly ______, their payoffs will be greater than if they did not.
answer
Collude
question
Entry into monopolistically competitive industries is
answer
Easy compared to industries in an oligopoly.
question
No single model is used to gain insights into oligopolistic pricing and output because of
answer
Diversity and complications from interdependence.
question
A monoplistically competitive firm's demand curve is
answer
Highly but not perfectly elastic
question
Which of the following are shortcomings of the kinked-demand analysis of oligopoly? During macroeconomic instability, oligopoly prices are much more rigid than the kinked-demand theory implies. The kinked-demand curve explains price inflexibility but not price itself. During macroeconomic instability, oligopoly prices are not as rigid as the kinked-demand theory implies. During macroeconomic stability, oligopoly prices are not as rigid as the kinked-demand theory implies. The kinked-demand curve explains price but not price inflexibility.
answer
The kinked-demand curve explains price inflexibility but not price itself. During macroeconomic instability, oligopoly prices are not as rigid as the kinked-demand theory implies.
question
Advertising may decrease economic efficiency if it
answer
Increases monopoly power
question
The use of advertising by oligopolists
answer
May increase or decrease competition. May increase or decrease prices.
question
What are the negative effects if large oligopolists do not advertise?
answer
Consumers would be unaware of important new products. Customers might purchase less efficient products that cost more.
question
The ability of monopolistically competitive firms to engage in _______ competition makes the market situation more complex because of differentiated product differences and advertising.
answer
Nonprice
question
The price at convenience stores for a bottle of soda is almost always higher than at supermarkets owing to the price customers are willing to pay to make their purchase at a more convenient ________.
answer
Location
question
Which of the following is a model used to examine oligopolistic pricing?
answer
The kinked-demand curve model
question
Allocative efficiency is achieved in the short run when the equality of which of the following occurs?
answer
P=MC
question
In a non-collusive oligopolistic industry, prices are generally stable for the following? Cost reasons Supply reasons Cartel reasons Demand reasons Elasticity reasons
answer
Cost reasons Demand reasons
question
Advertising can reduce efficiency by
answer
Providing misleading information Manipulating consumer preferences
question
When advertising is self-canceling, then it
answer
Decreases efficiency because demand remains unchanged but costs increase.
question
In order for a monopolistically competitive firm to maximize profits, it must juggle which of the following factors? The channels of distribution The selling price of the product The strategic business units needed The level of advertising The variety of product
answer
The selling price of the product The level of advertising The variety of product
question
A monopolistic competitor's demand curve is
answer
More elastic than that of a pure monopoly but less elastic than that of a firm in pure competition.
question
The ability of monopolistically competitive firms to engage in ___________ competition makes the market situation more complex because of differentiated product differences and advertising.
answer
Nonprice
Get an explanation on any task
Get unstuck with the help of our AI assistant in seconds
New