Question :
71) The excess-capacity theorem predicts that
A) when price-taking firms maximize : 1384253
71) The excess-capacity theorem predicts that
A) when price-taking firms maximize their profits by setting price equal to marginal cost, each firm operates with some excess capacity.
B) long-run equilibrium in a monopolistically competitive industry occurs with all firms producing at a lower output level than that which minimizes average total costs.
C) profit-maximizing firms will always choose to operate with some degree of excess capacity, in order to be flexible in the face of shifts in demand.
D) monopolistic firms will achieve positive economic profits by restricting output below the economically efficient level at which average total costs are minimized.
E) all firms in a perfectly competitive industry will produce at a lower output level than that which minimizes average total costs.
72) If firms are able to freely enter and exit a monopolistically competitive industry, then we can predict
A) a negatively sloped demand curve for the industry.
B) strategic behaviour with regard to other firms in the industry.
C) brand proliferation.
D) zero profits in long-run equilibrium.
E) that exit will occur until no firm has excess capacity.
73) Consider the following statement: “A monopolistically competitive market in which there are no entry barriers will have the identical long-run equilibrium as if the market were perfectly competitive.” Is this statement correct?
A) No, because firms in the monopolistically competitive market will not reach their minimum efficient scale as they would in perfect competition – the result is higher prices and lower output.
B) No, because firms in the monopolistically competitive market do not produce at an output level where MC = MR, as in perfect competition, which leads to a different price and output in long-run equilibrium.
C) No, firms in the monopolistically competitive market earn economic profits in the long run because they are facing a downward-sloping demand curve, whereas in perfect competition they earn zero profits.
D) Yes, in the absence of entry barriers, new firms enter the industry until industry price and output are identical to perfect competition.
E) Yes, in the absence of entry barriers, firms in the monopolistically competitive market will expand until they are producing at the minimum of their LRAC curves, just as in perfect competition.
74) One characteristic of oligopolistic markets is
A) ease of entry and exit.
B) zero profits in the long run.
C) mutual interdependence between firms.
D) a horizontal demand curve facing each individual firm.
E) a large number of firms in the industry.
75) Oligopolists make decisions after taking into account the expected reaction of their competitors. In doing this, oligopolists are exhibiting
A) non-strategic behaviour.
B) collusive behaviour.
C) cooperative behaviour.
D) non-cooperative behaviour.
E) strategic behaviour.
76) Unlike perfectly competitive and monopolistically competitive firms, oligopolists
A) operate where MR = MC.
B) take account of the likely reactions of their competitors to their actions.
C) always make positive profits.
D) always have differentiated products.
E) earn zero profits in the long run.
77) A duopoly is
A) an oligopoly with only two products.
B) an oligopoly with only two sellers.
C) an oligopoly with only two buyers.
D) a monopoly firm that has only two suppliers.
E) a monopolist that has two related products.
78) When the firms in an oligopoly are in a cooperative equilibrium and are maximizing their joint profits, which of the following statements is true?
A) An individual firm could increase profits by cheating.
B) P > MC for each individual firm.
C) MR > MC for each individual firm.
D) The firms in the industry will jointly be earning monopoly profits.
E) All of the above statements are true.
79) For firms in an oligopoly, the main advantage of explicit collusion is that it
A) removes much of the uncertainty about rivals’ reactions.
B) makes all firms more productively efficient.
C) leads to greater product differentiation.
D) reduces the cost per unit of advertising.
E) eliminates the gains from cheating.
80) Which of the following is a characteristic of oligopoly?
A) Firms compete solely on the basis of price.
B) The pricing policies of one firm have no impact on pricing policies of other firms.
C) There are large numbers of significantly sized sellers.
D) The industry usually has a low concentration ratio.
E) Prices are usually above marginal costs.
