micro econ Ch. 13

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Monopolistic competition is characterized by a:

large number of firms and low entry barriers.

Monopolistic competition resembles pure competition because:

barriers to entry are either weak or nonexistent.

Nonprice competition refers to:

advertising, product promotion, and changes in the real or perceived characteristics of a product.

The demand curve of a monopolistically competitive producer is:

more elastic than that of a pure monopolist, but less elastic than that of a pure competitor.

A monopolistically competitive firm’s marginal revenue curve:

is downsloping and lies below the demand curve.

Monopolistically competitive firms:

may realize either profits or losses in the short run but realize normal profits in the long run.

Refer to the diagrams, which pertain to monopolistically competitive firms. Short-run equilibrium entailing economic loss is shown by:

diagram c only.

Refer to the diagrams, which pertain to monopolistically competitive firms. A short-run equilibrium entailing economic profits is shown by:

diagram b only.

Refer to the diagrams, which pertain to monopolistically competitive firms. Long-run equilibrium is shown by:

diagram a only.

In which of these continuums of degrees of competition (highest to lowest) is oligopoly properly placed?

Pure competition, monopolistic competition, oligopoly, pure monopoly.

The term oligopoly indicates:

a few firms producing either a differentiated or a homogeneous product.

Oligopolistic industries are characterized by:

a few dominant firms and substantial entry barriers.

The automobile, household appliance, and automobile tire industries are all illustrations of:

differentiated oligopoly

Which of the following is the best example of oligopoly?

Automobile manufacturing.

In which of the following market models do demand and marginal revenue diverge?

Pure monopoly, oligopoly, and monopolistic competition.

Homogeneous oligopoly exists where a small number of firms are:

producing virtually identical products.

Mutual interdependence means that each oligopolistic firm:

must consider the reactions of its rivals when it determines its price policy.

If the four-firm concentration ratio for industry X is 80:

the four largest firms account for 80 percent of total sales.

As a general rule, oligopoly exists when the four-firm concentration ratio:

is 40 percent or more.

The Herfindahl index for a pure monopolist is:


Industries X and Y both have four-firm concentration ratios of 65 percent, but the Herfindahl index for X is 1,500 while that for Y is 2,000. These data suggest:

greater market power in Y than in X.

Assume six firms comprising an industry have market shares of 30, 30, 10, 10, 10, and 10 percent. The Herfindahl index for this industry is:


OPEC provides an example of:

an international cartel.

If the firms in an oligopolistic industry can establish an effective cartel, the resulting output and price will approximate those of:

a pure monopoly.

In the United States cartels are:

in violation of the antitrust laws.

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