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Question 1 of 10

1. Question

10 points

There are low or no barriers to enter a(n):

monopolistically competitive industry.
oligopoly industry.
a monopoly industry.
All of the listed answers are correct.

Question 2 of 10

2. Question

10 points

Which of the following is a characteristic of a monopolistically competitive industry?

Advertising on a local scale.
Significant barriers to entry.
Significant interdependence between the main large rival firms.
Significant interdependence between the main large rival firms.

Question 3 of 10

3. Question

10 points

Which of the following is a characteristic of an oligopoly industry?

None of the listed choices is correct.
There are no barriers for a new firm to enter this industry.
There are exactly 2 firms in this industry.
Firms in this industry are not dependent on each other's behaviors.

Question 4 of 10

4. Question

10 points

Which of the following is a difference between a purely competitive firm and a monopolistically competitive firm?

Average total cost at the profit-maximizing output in the long run is different for a monopolistically competitive firm, as compared to a purely competitive firm. For a purely competitive firm, average total cost is at its minimum point.
There are barriers to entry in monopolistic competition, but not in pure competition.
There are zero economic profits in the long run for a monopolistically competitive firm, but not a purely competitive firm.
The number of firms in the industry is large for a monopolistically competitive firm, but not a purely competitive firm.

Question 5 of 10

5. Question

10 points

Which of the following industries is a good example of an oligopoly industry?

The breakfast cereal industry, in which a few large producers sell the majority of the cereal brands.
The restaurant industry, in which hundreds of restaurants compete in a certain region offering meals to their customers.
The food market, in which thousands of farmers sell food products to wholesale food establishments.
The retail gas stations industry, in which many local gas stations compete against each other to sell gasoline.

Question 6 of 10

6. Question

10 points

When gasoline prices rise, oil companies are often accused of collusion in order to artificially raise the price and reap exorbitant (extremely high) profits. Which of the following is a reason why this is unlikely to persist in the long run?

All of the listed answers are correct.
A high price will leave room for competitors in the industry to undercut the price and capture a larger share of the market.
It is usually very difficult for all the producers in the industry to come to an agreement about the price and production quotas.
A high price will invite new entrants (competitors) into the market who will undercut the price in order to establish a place in the market.

Question 7 of 10

7. Question

10 points

What is the explanation for the kink in the kinked demand curve of an oligopolist?

In an oligopoly industry, rival firms usually lower their price if a competitor lowers its price. Rival firms usually choose to not change their price if a competitor raises its price.
In an oligopoly industry there are two firms. Each firm has its own separate demand curve
When prices increase the elasticity of the oligopolist's demand curve increases. At lower prices, the elasticity is usually zero or close to zero.
In an oligopoly industry there are no barriers to entry in the short run, but not in the long run. The demand curve is more elastic in the short run and less elastic in the long run.

Question 8 of 10

8. Question

10 points

A firm in monopolistic competition maximizes profits by identifying that price and output at which:

marginal cost equals marginal revenue, or where marginal cost comes closest to marginal revenue without being greater than marginal revenue. All this is contingent upon the conditions that the price is greater than the average variable cost and marginal cost must be rising.
marginal cost equals marginal revenue, or where marginal cost comes closest to marginal revenue without being less than marginal revenue. All this is contingent upon the conditions that the price is less than the average variable cost and the marginal cost must be falling.
marginal cost equals marginal revenue, or where marginal cost comes closest to marginal revenue without being greater than marginal revenue. All this is contingent upon the conditions that the price is less than the average variable cost and the marginal cost must be falling.
marginal cost is greater than marginal revenue. All this is contingent upon the conditions that the price is less than the average total cost and the marginal cost must be falling.

Question 9 of 10

9. Question

10 points

The demand curve of a typical firm in monopolistic competition is:

downward-sloping and less-elastic than a perfectly competitive firm's demand curve.
upward-sloping and less-elastic (steeper) than a perfectly competitive firm's demand curve.
upward-sloping and more-elastic than a perfectly competitive firm's demand curve.
downward-sloping and more elastic than a perfectly competitive firm's demand curve.

Question 10 of 10

10. Question

10 points

According to oligopoly game theory (Nash equilibrium), if firm A sets a high price and firm B sets a low price, then:

The profits of firm A will be relatively low and the profits of firm B will be relatively high.
The profits of firm A will be relatively high and the profits of firm B will be relatively low.
The profits of both firms will be relatively low
The profits of both firms will be relatively high

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Unit 8