Which of the arguments Staples and Office Depot made in defense of their proposed merger would be least defensible on economic grounds?
A) There would be substantial economies of scale.
B) The two firms were in competition with all other office supply stores, not just office supply superstores.
C) The history of low pricing by the two stores meant that they would not raise prices in the future after they merged.
D) Entry into the office supply market is relatively easy.
52) Microsoft enjoyed the benefit of several barriers to entry, including all of the following except:
A) lock in and switching costs.
B) patents and copyright protection.
C) input barriers.
D) network externalities.
53) Which of the following is characteristics is common to both monopoly and monopolistic competition?
A) Ease of entry into the industry.
B) Firms are price setters.
C) A relatively large number of sellers.
D) Long-run economic profit equals 0.
54) Which of the following is the best example of a monopolistically competitive market?
A) The wheat market.
B) The electricity market.
C) The restaurant market.
D) The market for automobiles.
55) Assume it is announced that a large number of new competitors have entered the market for mountain bikes, each offering a different model. Based on this information, this industry is best characterized as:
A) perfectly competitive.
B) a monopoly.
C) monopolistically competitive.
D) an oligopoly.
56) Because firms produce a differentiated product, each of the firms in a monopolistically competitive market faces a demand curve that is:
A) perfectly elastic.
B) perfectly inelastic.
C) downward sloping.
D) perfectly elastic or perfectly inelastic depending on whether the firm's output is a luxury or a necessity.
57) The monopolistically competitive seller's demand curve will tend to become more elastic the:
A) smaller the number of sellers.
B) greater the degree of product differentiation.
C) larger the number of close competitors.
D) more significant the barriers to entering an industry.
58) Assume the firms in a monopolistically competitive industry initially are earning positive economic profits. Which of the following will not occur over time?
A) The firms' economic profits will be reduced.
B) New firms will enter.
C) Demand for the existing firms' output will become more inelastic.
D) The number of substitutes available in the industry will increase.
59) All of the following are characteristics of long-run equilibrium for firms in a monopolistically competitive market except:
A) price equals marginal cost.
B) price equals average total cost.
C) marginal cost equals marginal revenue.
D) price exceeds the minimum of average total cost.
60) Suppose the firms in a monopolistically competitive market are earning positive economic profits. What will happen to move the market to its long-run equilibrium?
A) The firms' demand curves will become less elastic.
B) The demand curves faced by firms in the market will shift to the right.
C) More close substitutes will appear in the market.
D) Some firms will exit the market if they can't cover all of their fixed and variable costs.
61) Suppose the firms in a monopolistically competitive market are incurring economic losses. What will happen to move the market to its long-run equilibrium?
A) More close substitutes will appear in the market until economic profits are zero.
B) The firms that dropped out of the market will reenter once the level of economic losses is zero.
C) Firms will continue to exit the market until economic losses are equal to zero.
D) The demand functions of all the firms remaining in the market will become relatively more elastic
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