American Military University ECON 201 / ECON201 Week 7 Quiz

Question 1 Monopolistic competition is an industry characterized by a: • A. small number of firms producing identical products, with barriers to entry for firms. • B. small number of firms producing similar products, with relatively easy entry for firms. • C. large number of firms producing similar products, with relatively easy entry for firms. • D. large number of firms producing identical products, with relatively easy entry for firms. Answer Key:C Question 2 Imperfect competition is: • A. a market structure with no more than one firm in the industry. • B. an industry in which all firms are price takers. C. a market structure where firms have a degree of monopoly power. • D. described by all of the above. Answer Key:C Question 3 Imperfect competition includes: • A. monopolistic competition and oligopoly. • B. monopolistic competition and monopoly. • C. perfect competition and monopoly. • D. monopoly and oligopoly. Answer Key:A Question 4 A firm in monopolistic competition maximizes its profit by producing at the level at which: A. MC = ATC. • B. MC = AR. • C. MC = P. • D. MC = MR. Answer Key:D Question 5 An industry characterized by many firms, producing similar but differentiated products, in a market with easy entry and exit is called: • A. perfect competition. • B. monopoly. • C. monopolistic competition. • D. oligopoly. Answer Key:C Question 6 An oligopoly knows that its affect(s) its and that the of its rivals will affect it. • A. actions; rivals; reactions • B. price changes ; total revenue in a positive way; reactions • C. actions rarely; rivals; actions • D. price increases; total revenue in the long run only; large but not small price changes Answer Key:A Question 7 A concentration ratio is used to measure: • A. efficiency. • B. diseconomies of scale. • C. marginal cost. • D. market dominance. Answer Key:D Question 8 An industry dominated by a few firms, where each of those firms recognizes that its own choices will affect the choices of its rivals and that its rivals' choices will affect it, is a(n): • A. monopoly. • B. oligopoly. • • C. monopolistic competition. • D. perfect competition. Answer Key:B Question 9 Price for a firm under monopolistic competition is: • A. equal to marginal revenue. • B. greater than marginal revenue. • C. less than marginal revenue. • D. greater than total revenue. Answer Key:B Question 10 Unwritten or unspoken understandings through which firms collude to restrict competition are called: A. cartelization. • B. oligopolization. • C. overt collusion. • D. tacit collusion. Answer Key:D Part 2 of 2 - Profit Maximization for a Firm in Monopolistic Competition 30.0/ 30.0 Points Question 11 (Exhibit: Profit Maximization for a Firm in Monopolistic Competition) Suppose that an innovation reduces a firm's fixed costs and reduces cost from ATC to ATC' Before the innovation reduced the cost, the firm's maximum economic profit was: A. $0. • B. $30. • C. $750. • D. $4,500. Answer Key:A Question 12 (Exhibit: Profit Maximization for a Firm in Monopolistic Competition.) Suppose that an innovation reduces a firm's fixed costs and reduces cost from ATC to ATC' After the innovation reduced the cost, the firm's maximum economic profit is: • A. $0. • B. $30. C. $1,500. • D. $3,000. Answer Key:C Question 13 (Exhibit: Profit Maximization for a Firm in Monopolistic Competition) Suppose that an innovation reduces a firm's fixed costs and reduces cost from ATC to ATC' Suppose further that after the innovation reduced the cost to ATC?, it costs a total of $18 per unit to produce 170 units per day. If the firm charges a price equal to marginal cost, total net profit will be: • A. $1,700. • B. $1,190. • C. $3,060. • D. $3,400. Answer Key:B