Multiple Choice Questions on Monopolistic Competition and Oligopoly | Microeconomics | Trường Đại học Quốc tế, Đại học Quốc gia Thành phố Hồ Chí Minh

Multiple choice topic – 9
Question 1: Under monopolistic competition, entry to the industry is:
A: completely free of barriers.
B: more difficult than under pure competition, but not nearly as difficult as under pure monopoly.
C: more difficult than under pure monopoly. D: blocked.
Question 2: Which of the following is not characteristic of monopolistic competition?
A: Easy entry to the industry.
B: Relatively large numbers of sellers. C: Product differentiation.
D: Production at minimum ATC in the long run.
Question 3: If the number of firms in a monopolistically competitive industry increases,
and the degree of product differentiation diminishes:
A: the likelihood of realising economic profits in the long run would be enhanced.
B: individual firms would now be operating at outputs where their average total costs would be higher.
C: the industry would more closely approximate pure competition.
D: the likelihood of collusive pricing would increase.
Question 4: The monopolistic competition model predicts that:
A: allocative efficiency will be achieved.
B: productive efficiency will be achieved.
C: firms will engage in non-price competition.
D: firms will realise economic profits in the long run.
Question 5: A monopolistically competitive firm has a :
A: highly elastic demand curve.
B: highly inelastic demand curve.
C: perfectly inelastic demand curve.
D: perfectly elastic demand curve.
Question 6: The monopolistically competitive seller's demand curve will tend to become more elastic, the: 1
A: more significant the barriers to entering the industry.
B: greater the degree of product differentiation.
C: larger the number of competitors.
D: smaller the number of competitors.
Question 7: A monopolistically competitive firm's marginal revenue curve:
A: is downsloping and coincides with the demand curve.
B: coincides with the demand curve and is parallel to the horizontal axis.
C: is downsloping and lies below the demand curve.
D: does not exist because the firm is a ‘price maker’.
Question 8: Monopolistically competitive firms:
A: realise normal profits in the short run, but losses in the long run.
B: tend to incur persistent losses in both the short run and long run.
C: may realise either profits or losses in the short run, but tend to realise a normal profit in the long run.
D: persistently realise economic profits in both the short run and long run.
Question 9: The monopolistically competitive seller maximises profits by producing at the point where:
A: total revenue is at a maximum.
B: average costs are at a minimum.
C: marginal revenue equals marginal cost.
D: price equals marginal revenue.
Question 10: In the long run, a monopolistically competitive firm's economic profits:
A: will be maximised where price equals average cost.
B: may be positive, zero, or negative. C: are always positive. D: tend towards zero.
Question 11: Other things being the same, if more firms enter a monopolistically
competitive industry, we would expect:
A: the demand curves facing existing firms to shift to the right.
B: the demand curves facing existing firms to shift to the left.
C: the demand curves facing existing firms to become less elastic.
D: that losses would necessarily occur. 2
Question 12: The following are demand and cost data for a specific firm: DEMAND DATA COST DATA (1) (2) (3) Price($) Price($) Quantity Output Total cost($) 11 10 6 6 61 9.99 8.85 7 7 62 9 8 8 8 64 8 7 9 9 67 7.10 6.10 10 10 72 6 5 11 11 79 5.15 4.15 12 12 86
Refer to the above information. If columns (1) and (3) of the demand data are this firm's
demand schedule, the profit-maximising price will be: A: $9 B: $7 C: $11 D: $6
Question 13: The following are demand and cost data for a specific firm: DEMAND DATA COST DATA (1) (2) (3) Price($) Price($) Quantity Output Total cost($) 11 10 6 6 61 9.99 8.85 7 7 62 9 8 8 8 64 8 7 9 9 67 7.10 6.10 10 10 72 6 5 11 11 79 5.15 4.15 12 12 86
Refer to the above information. Suppose that entry into the industry changes this firm's
demand schedule from columns (1) and (3) to columns (2) and (3). Economic profit will: A: fall by $10. B: fall to $6. C: increase by $10. D: decline to zero.
Question 14: An important similarity between a monopolistically competitive firm and a
purely competitive firm is that: 3
A: both face perfectly elastic demand schedules.
B: economic profits tend toward zero for both.
C: both realise productive efficiency.
D: both realise allocative efficiency.
Question 15: In equilibrium, a monopolistically competitive producer achieves:
A: neither ‘productive efficiency’ nor ‘allocative efficiency’.
B: both ‘productive efficiency’ and ‘allocative efficiency’.
C: ‘productive efficiency’, but not ‘allocative efficiency’.
D: ‘allocative efficiency’, but not ‘productive efficiency’.
Question 16: Non-price competition refers to:
A: competition between products of different industries, e.g. competition between
aluminium and steel in the manufacture of automobile parts.
B: price increases by a firm, which are ignored by its rivals.
C: advertising, product promotion, and changes in the real or perceived characteristics of a product.
D: reductions in production costs which are not reflected in price reductions.
Question 17: Oligopolistic industries are characterised by:
A: a few dominant firms and substantial entry barriers.
B: a few dominant firms and no barriers to entry.
C: a large number of firms and low entry barriers.
D: a few dominant firms and low entry barriers.
Question 18: The mutual interdependence which characterises oligopoly arises because:
A: the products of various firms are homogeneous.
B: the products of various firms are differentiated.
C: a small number of firms produce a large proportion of industry output.
D: the demand curves of firms are kinked at the prevailing price.
Question 19: Barriers to entry in oligopolistic industries may consist of: A: economies of scale. B: patents.
C: ownership of essential resources. D: all of the above.
Question 20: Economists use game theory to analyse the choices faced by the managers
of oligopolistic firms primarily because: 4
A: the number of firms is too large to make collusion understandable.
B: the price and output decisions of any one firm depend upon the reactions of its rivals.
C: output may be either homogeneous or differentiated.
D: neither allocative nor productive efficiency is achieved.
Question 21: Concentration ratios measure the:
A: geographic location of the largest corporations in each industry.
B: degree to which product price exceeds marginal cost in various industries.
C: percentage of total sales accounted for by a given number of the largest firms in the industry.
D: number of firms in an industry.
Question 22: Game theory can be used to demonstrate:
A: that oligopolistic firms are mutually interdependent.
B: that independent pricing will lead to low-price policies.
C: that oligopolists can increase their profits through collusion. D: all of the above.
Question 23: The kinked demand curve model helps to explain price rigidity because:
A: there is a gap in the marginal revenue curve, within which changes in marginal cost
will not affect output or price.
B: demand is inelastic above and elastic below the ‘going’ price.
C: the model assumes firms are engaging in some form of collusion.
D: the associated marginal revenue curve is perfectly elastic at the ‘going’ price. 5