Chapter 13 Quiz

Monopolistic competition is characterized by a:
large number of firms and low entry barriers
Under monopolistic competition entry to the industry is:
more difficult than under pure competition, but not nearly as pure monopoly
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 restaurant, legal assistance and clothing industries are each illustrations of:
monopolistic competition
Monopolistically competitive seller maximizes profit by producing at the point where
marginal revenue = marginal cost
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long-run equilibrium for a monopolistically competitive firm where economic profits are zero results from:
relatively easy entry
When a monopolistically competitive firm is in long-run equilibrium
MR>MC and P=Min. ATC
Which of these continuums of degrees of competition (highest to lowest) is correct?
pure competition, monopolistic competition, oligopoly and pure monopoly
The term oligopoly indicates
a few firms producing either a homogenous or differentiated product
What is a good example of oligopoly?
auto manufacturing
Which is a unique feature of oligopoly?
mutual interdependence
Game theory
the analysis of how people (or firms) behave in strategic situations
The study of how people or firms behave in strategic situations is called
game theory
The kinked-demand curve of an oligopolist is based on the assumption that
competitors will follow a price cut, but ignore a price increase
OPEC provides an example of
an international cartel
Cartels are difficult to maintain in the long run because:
individual members may find it profitable to cheat on agreements
In the US cartels are;
in violation of antitrust laws
A breakdown in price leadership leading to successive rounds of price cuts is known as
a price war
Monopolistically competitive firms:
may realize either profits or losses in the short run, but realize only accounting profits in the long run
Which is the best example of oligopoly?
a. women’s dress manufacturing
b. automobile manufacturing
c. restaurants
d. cotton farming
automobile manufacturing