04 Jun Question Imperfect Competition
Question
Imperfect Competition
1. A monopolistically competitive market is characterized by all of the following except a. easy entry. b. differentiated products. c. excess capacity. d. economic profit in the long run.
2. An oligopolistic industry can be characterized by all of the following except a. many sellers. b. mutual interdependence. c. economies of scale. d. a homogenous product.
3. The kinked demand curve faced by an oligopolist is based on the assumption that a. rivals will follow a price increase but not a price cut. b. rivals will follow a price decrease but not a price increase. c. rivals will follow both a price decrease and a price increase. d. rivals will ignore both a price increase and a price decrease.
4. A common criticism of the kinked demand curve model is that a. it does not explain the interdependence of the demand curve. b. it does not explain why costs remain rigid in the face of changing demand. c. it does not explain how price was determined. d. none of the above.
5. Which of the following does not characterize monopolistic competition? a. Product differentiation. b. Many producers. c. Absence of advertising. d. Some control over price. e. All of the above characterize monopolistic competition.
6. Product differentiation gives each seller a small amount of monopoly power because a. little or nothing can be said concerning the social desirability or undesirability of product differentiation. b. there can be little substitution between product groups. c. the products of other firms are not perfect substitutes. d. the presence of excess capacity greatly reduces monopoly power. e. the monopolistic competitor faces a downward sloping demand curve.
7. A monopolistically competitive firm differs from a perfectly competitive firm in that, unlike the perfectly competitive firm, it a. faces a downward sloping demand curve. b. can change the characteristics of its product. c. can vary the price of its product. d. tends to operate with excess capacity. e. all of the above.
8. One of the differences between a perfectly competitive firm’s long-run equilibrium and the long-run equilibrium of a monopolistically competitive firm is that a. LMS = MR under perfect competition, but not under monopolistic competition. b. SAC = LAC under perfect competition, but not under monopolistic competition. c. SMC = LMC under perfect competition, but not under monopolistic competition. d. LAC = LMC under perfect competition, but not under monopolistic competition. e. economic profits are zero under perfect competition, but not under monopolistic competition.
9. In the neighborhood of the long-run equilibrium of a monopolistically competitive firm, average cost will be a. decreasing. b. constant. c. increasing. d. at a minimum. e. either (a) or (c).
10. A conclusion that monopolistic competition will be characterized by excess capacity a. means that the firm produces less than the profit-maximizing level of output. b. means that the firm produces more than the profit-maximizing level of output. c. means that the firm does not operate its plant at the minimum point of the long-run average cost curve. d. means that the firm does not operate its plant at the minimum poin
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