.Because of one assumption in the theory of monopolistic competition, the excess capacity theorem exists. What is the assumption?
a.There are many sellers and buyers.
b.Each firm produces and sells a slightly differentiated product.
c.There is easy entry into the industry.
d.There is easy exit from the industry.
99.For a monopoly firm, price is __________ marginal revenue, and for a monopolistic competitive firm, price is __________ marginal revenue.
a.less than; equal to
b.greater than; equal to
c.greater than; less than
d.greater than; greater than
e.equal to; less than
100.Which of the following is not an assumption of oligopoly?
a.There are few sellers.
b.There are few buyers.
c.Firms produce and sell either homogeneous or differentiated products.
d.There are significant barriers to entry.
e.b and c
101.One of the key characteristics of oligopoly is that
a.firms are independent of each other.
b.firms face different cost conditions.
c.each firm is aware that its actions will influence other firms and that the actions of the other firms affect it.
d.it is easy to enter the industry.
e.none of the above
102.If the four-firm concentration ratio is 0.45, and the top four firms account for $10 million in sales, it follows that total industry sales equal
103.If the top four firms account for $75 billion in sales and total industry sales are $300 billion, it follows that the four-firm concentration ratio is
104.Which of the following is true?
a.Concentration ratios take into account competition from substitute goods.
b.The four-firm concentration ratio is likely to be larger than the eight-firm concentration ratio.
c.There are assumed to be insignificant barriers to entry in the theory of oligopoly.
d.A designer label on a pair of jeans is a way of differentiating one seller's jeans from another seller's jeans.
e.all the above
105.The eight-firm concentration ratio for an industry is 0.80. If the top four firms in the industry account for $45 million in sales, what do total sales equal?
e.There is not enough information to answer the question.
106.In monopolistic competition, firms can compete in terms of
b.quality of product.
e.all of the above
107.Which of the following is false?
a.A perfectly competitive firm is resource-allocative efficient, but a monopolistic competitive firm is not.
b.An oligopolistic firm is not resource-allocative efficient.
c.An oligopolist produces that quantity of output at which price is equal to marginal cost.
d.A monopolistic competitive firm produces a quantity of output at which price is greater than marginal cost.
108.The key behavioral assumption of the cartel theory is that oligopolists in the industry act as if
a.all firms in the industry are the same size.
b.all firms in the industry are price takers.
c.there is a dominant firm in the industry and many fringe firms.
d.there is only one firm in the industry.
e.none of the above
109.Cartels often dissolve because
a.their members often set a time limit as to how long the cartel should exist.
b.their members often cheat on the cartel agreements because they have incentive to.
c.their members often find that they do not earn as high profits from the cartel as they had hoped to.
d.firms in a cartel face different costs than firms outside a cartel.
e.none of the above
110.If two firms that form a cartel agreement are in a prisoner's dilemma game, then
a.both firms will have an incentive to break the agreement.
b.only one firm will have an incentive to break the agreement.
c.both firms will be better off if they hold to the agreement than if they break it.
d.a and c
e.b and c
111.Which of the following is not a condition of a contestable market?
a.There is easy entry into the market.
b.There is costless exit from the market.
c.New firms entering the market can produce the product at lower cost than current firms.
d.Firms exiting the market can easily dispose of their fixed assets by selling them elsewhere.
e.None of the above; that is, all of the above are conditions of a contestable market.
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