MISY 5340/ MISY5340 Exam 4 | Questions and Answers Latest Updated 2025/26.

MISY 5340/ MISY5340 Exam 4 | Questions and Answers Latest Updated 2025/26. 1.The main difference between perfect competition and monopolistic competition is: a. The number of sellers in the market b. The ease of entry and exit in the industry c. The degree of information about market price d. The degree of product differentiation e. Whether it is the short run or the long run 2.Long distance telephone service has become a competitive market. The average cost per call is $0.05 a minute, and it's declining. The likely reason for the declining price for long distance service is: a. Governmental pressure to lower the price b. Reduced demand for long distance service c. Entry into this industry pushes prices down d. Lower price for a barrel of crude oil e. Increased cost of providing long distance service 3. What is the profit maximization point for a firm in a purely competitive environment? a. The output where P = MC b. The output where P MC c. The output where P MC d. The output where MR = MC e. The output where AVC P 4. All of the following are true for both competition and monopolistic competition in the long run, except one of them. Which is it? a. P = MC b. P = AC c. Economic profits become zero in the long-run d. The barriers to entry and exit are relatively easy e. None of the above is an exception 5. Which of the following statements is (are) true concerning a pure competition situation? a. Its demand curve is represented by a vertical line. b. Firms must sell at or below market price. c. Marginal revenue is equal to price. d. both b and c e. both a and b 6. In pure competition: a. the optimal price-output solution occurs at the point where marginal revenue is equal to price b. a firm's demand curve is represented by a horizontal line c. a firm is a price-taker since the products of every producer are perfectsubstitutes for the products of every other producer d. a and b only e. a, b, and c 7. In the short-run for a purely competitive market, a manufacturer will stop production when: a. the total revenue is less than total costs b. the contribution to fixed costs is zero or less c. the price is greater than AVC d. operating at a loss e. a and b 8.In the purely competitive case, marginal revenue (MR) is equal to: a. cost b. profit c. price d. total revenue e. none of the above 9.In long-run equilibrium, all firms in a pure competition market situation operating under a condition of certainty will have identical costs even though they may use different production and operation techniques. a. true b. false 10. If price exceeds average costs under pure competition, ____ firms will enter the industry, supply will ____, and price will be driven ____. a. more; decrease; down b. more; decrease; up c. more; increase; down d. more; increase; up e. none of the above 11.A firm in pure competition would shut down when: a. price is less than average total cost b. price is less than average fixed cost c. price is less than marginal cost d. price is less than average variable cost 12.0In the long-run, firms in a monopolistically competitive industry will a. earn substantial economic profits b. tend to just cover costs, including normal profits c. seek to increase the scale of operations d. seek to reduce the scale of operations 13.Uncertainty includes all of the following except ____.a. unknown effects of deliberate actions b. incomplete information as to the type of competitor c. random disturbances d. unverifiable claims e. accidents due to weather hazards 14.Experience goods are products or services a. that the customer already knows b. whose performance is highly unusual c. whose quality is undetectable when purchased d. not likely to cause repeat purchases e. all of the above 15.. Buyers anticipate that the temporary warehouse seller of unbranded computer equipment will a. deliver high quality products consistent with expectations b. not attempt to establish any warranty enforcement mechanisms c. offer several prices and qualities d. produce only one quality e. none of the above 16.All of the following are mechanisms which reduce the adverse selection problem except ____. a. warranties from established enterprises with non-redeployable assets b. high interest rates c. large collateral requirements d. brand names and product-specific promotions and retail displays e. higher prices in repeat customer transactions 17.Asset specificity is largest when a. value in first best use is large b. value in second best use is large c. customers choose their supplier at random d. very valuable assets are non-redeployable e. customers are loyal to a particular seller 18.Under asymmetric information, a. you never get what you pay for b. you sometimes get cheated c. you always get cheated d. at best you get what you pay for e. sellers make profits in excess of competitive returns 19.To escape adverse selection and elicit high quality experience goods buyers can a. offer price premiums to new firms in the marketb. seek out unbranded goods c. buy from generic storefronts that have leased temporary space d. secure warranties from warehouse retailers e. none of the above 20.The problems of asymmetric information exchange arise ultimately because a. one party to the exchange possesses different information than another b. one party has more information than another c. one party knows nothing d. one party cannot independently verify the information of another e. information is scarce 21.The market for "lemons" is one in which a. the rational buyer discounts b. the seller's product claims are unverifiable at the point of purchase c. the bad apples drive out the good" d. the problem of adverse selection is rampant e. all of the above 22.The fraudulent delivery of low quality experience goods at high prices is more likely if a. interest rates decline b. information about notorious firms is speedily disseminated c. price premiums for allegedly high quality increase d. sellers invest in non-transferable reputation e. none of the above 23.An "experience good" is one that: a. Only an expert can use b. Has undetectable quality when purchased c. Can be readily experienced simply by touching or tasting d. Improves with age, like a fine wine e. All of the above 24.A "search good" is: a. One that depends on how the product behaves over time b. A product whose quality is only found out over time by finding how durable it is c. Like a peach that can be examined for flaws d. Like a used car, since it is easy to determine its inherent quality e. None of the above 25.The price for used cars is well below the price of new cars of the same general quality. This is an example of: a. The Degree of Operating Leverageb. A Lemon's Market c. Redeployment Assets d. Cyclical Competition e. The Unemployment Rate 26.To remain competitive today, many companies commit themselves to: a. continuous improvement processes b. competitive strategic analysis by outside experts c. episodes of strategic planning d. a and c e. b and c 27.The essence of competitive strategy includes which of these? a. management-based capabilities b. resource=based capabilities c. business processes d. adaptive innovation e. a, b & c f. b, c & d 28.Unique Creations has a monopoly position in magnometers. If the marginal cost for a magnometer is $50 and the price elasticity for magnometers is -4, what is the optimal monopoly price? Hint: P (1 +1/E) = MC. a. $37.50 b. $41.25 c. $66.67 d. $75.00 e. $82.50 29.Land's End estimates a demand curve for turtleneck sweaters to be: Log Q = .41 + 2.3 Log Y - 3 Log P where Q is quantity, P is price, and Y is a measure on national income. If the marginal cost of imported turtleneck sweaters is $9.00. (HINT: P (1 +1/E) = MC). The optimal monopoly price would be: a. P = $13.50 b. P = $26.50 c. P = $27.50 d. P = $34.50 e. P = $56.22 30.Declining cost industries a. have upward rising AC curves. b. have upward rising demand curves. c. have ∩-shaped total costs. d. have diseconomies of scale.e. have marginal cost curves below their average cost curve. 31.A monopolist seller of Irish ceramics faces the following demand function for its product: P = 62 - 3Q. The fixed cost is $10 and the variable cost per unit is $2. What is the maximizing QUANTITY for this monopoly? Hint: MR is twice as steep as the inverse demand curve: MR = 62 - 6 Q. (Pick closest answer) a. Q = 10 b. Q = 15 c. Q = 22 d. Q = 37 e. Q = 41 32. Globo Public Supply has $1,000,000 in assets. Its demand curve is: P = 206 - .20•Q and its total cost function is: TC = 20,000 + 6•Q where TC excludes the cost of capital. If Globo Public Supply is UNREGULATED, find Globo's optimal price. a. $206 b. $106 c. $56 d. $6 e. $3 33.A monopolist faces the following demand curve: P = 12 - .3Q with marginal costs of $3. What is the monopolistic PRICE? a. P = $5.50 b. P = $6.50 c. P = $7.50 d. P = $8.50 e. P = $9.50 34. In natural monopoly, AC continuously declines due to economies in distribution or in production, which tends to found in industries which face increasing returns to scale. If price were set equal to marginal cost, then: a. price would equal average cost. b. price would exceed average cost. c. price would be below average cost. d. price would be at the profit maximizing level for natural monopoly e. all of the above 35. The profit-maximizing monopolist, faced with a negative-sloping demand curve, will always produce: a. at an output greater than the output where average costs are minimizedb. at an output short of that output where average costs are minimized c. at an output equal to industry output under pure competition d. a and c e. none of the above 36.In the case of pure monopoly: a. one firm is the sole producer of a good or service which has no close substitutes b. the firm's profit is maximized at the price and output combination where marginal cost equals marginal revenue c. the demand curve is always elastic d. a and b only e. a, b, and c 37. A monopoly will always produce less than a purely competitive industry, ceteris paribus. a. true b. false 38.The demand curve facing the firm in ____ is the same as the industry demand curve. a. pure competition b. monopolistic competition c. oligopoly d. pure monopoly e. none of the above 39. When the cross elasticity of demand between one product and all other products is low, one is generally referring to a(n) ____ situation. a. oligopoly b. monopoly c. pure competition d. substitution e. monopolistic competition 40. Of the following, which is not an economic rationale for public utility regulation? a. production process exhibiting increasing returns to scale b. constant cost industry c. avoidance of duplication of facilities d. protection of consumers from price discrimination e. none of the above 41.. The practice by telephone companies of charging lower long-distance rates at night than during the day is an example of:a. inverted block pricing b. second-degree price discrimination c. peak-load pricing d. first-degree price discrimination e. none of the above 42. In the electric power industry, residential customers have relatively ____ demand for electricity compared with large industrial users. But contrary to price discrimination, large industrial users generally are charged ____ rates. a. similar, similar b. elastic, lower c. elastic, higher d. inelastic, lower e. inelastic, higher 43.Which of the following is a source of market power for a monopolist? a. a firm may have a patent or copyright b. a firm may control critical resources c. a firm may have a government-authorized franchise d. a firm may enjoy economies of scale e. all of the above are sources of market power for a monopolist 44. Regulatory agencies engage in all of the following activities except _______. a. controlling entry into the regulated industries b. overseeing the quality of service provided by the firms c. setting federal and state income tax rates on regulated firms d. setting prices that consumers will pay e. none of the above 45.Microsoft's success over Apple although Apple had a technologically superior product is the result of: a. increasing returns in a network-based business b. Microsoft's economies of scale over a wide range of output c. the revenue sources derived from Microsoft's intellectual property d. superior marketing and promotions e. all of the above 46.Which of the following relate(s) to gross profit margin? a. a term often used in manufacturing businesses b. the profit margin after subtracting direct costs from wholesale revenue c. the profit margin after subtracting variable manufacturing costs d. a and b e. a through c47. Exceptions to the prohibition against cartels exist for which of the following? a. ocean shipping rates b. various agricultural products such as milk and oranges c. transoceanic airline routes d. cardboard box manufacturers e. a through c f. a through d 48.The kinked demand curve model helps to explain: a. fluctuations of prices in pure competition b. stabilities observed in prices in oligopolistic industries c. fluctuations observed in prices in oligopolistic industries d. all of the above e. none of the above 49.An oligopoly is characterized by: a. a relatively small number of firms b. either differentiated or undifferentiated products c. actions of any individual firm will affect sales of other firms in the industry d. a and b e. a, b, and c 50. Which of the following is an example of an oligopolistic market structure? a. public utilities b. air transport industry c. liquor retailers d. wheat farmers e. none of the above 51.In the Cournot duopoly model, each of the two firms, in determining its profit-maximizing price-output level, assumes that the other firm's ____ will not change. a. price b. output c. marketing strategy d. inventory e. none of the above 52.If a cartel seeks to maximize profits, the market share (or quota) for each firm should be set at a level such that the ____ of all firms is identical. a. average total cost b. average profit c. marginal profitd. marginal cost e. marginal revenue 53. In the absence of any legally binding enforcement mechanism, individual cartel producers may find it advantageous to cheat on the agreements and engage in secret price concessions. a. true b. false 54.A(n) ____ is characterized by a relatively small number of firms producing a product. a. monopoly b. syndicate c. cooperative d. oligopoly e. none of the above 55. The distinctive characteristic of an oligopolistic market structure is that there are recognizable interdependencies among the decisions of the firms. a. true b. false 56. Factors that affect the ability of oligopolistic firms to successfully engage in cooperation include ____. a. number and size distribution of sellers b. size and frequency of orders c. product heterogeneity d. a and b only e. a, b, and c 57.Effective oligopolistic collusion is more likely to occur when customer orders are small, frequent, and received on a regular basis as compared with large orders that are received infrequently at irregular intervals. a. true b. false 58. Effective collusion generally is more difficult as the number of oligopolistic firms involved increases. a. true b. false 59.The largest problem faced in cartel pricing agreements such as OPEC is:a. detecting violations of quota barriers by cartel participants b. arriving at a profit maximizing price c. attracting participants in the cartel d. none of the above 60.Some market conditions make cartels MORE likely to succeed in collusion. Which of the following will make collusion more successful? a. The products are heterogeneous b. The orders are small and frequent c. The firms are all about the same size d. Costs differ across the firms e. Firms are geographically widely scattered 61.Even ideal cartels tend to be unstable because a. firms typically prefer competition to collusion as competition, because it leads to more profits. b. collusion leads to lowest possible overall profits in the industry. c. oligopolistic managers are extremely risk loving. d. firms can benefit by secretly selling more than they promised the other firms e. all of the above 62. Suppose that in a perfectly competitive industry the equilibrium industry quantity is 10,000 units. Suppose that the monopoly output is 5,000. For a 2- firm Cournot Oligopoly (N =2) known as a duopoly, what is a likely Cournot QUANTITY for the industry? a. 3,000 units b. 5,000 units c. 6,667 units d. 10,000 units e. 15,000 units 63.A cartel is a situation where firms in the industry a. have an agreement to restrict output. b. agree to produce identical products. c. obey the rules of dominant firm price leadership. d. experience the pain of a kinked demand curve. e. have a barometric price leader 64.In a kinked demand market, whenever one firm decides to lower its price, a. other firms will automatically follow. b. none of the other firms will follow. c. one half of the firms follow and one half of the firms don't follow the price cut. d. other firms all decide to exit the industrye. all of the other firms raise their prices. 65.The existence of a kinked demand curve under oligopoly conditions may result in a. volatile prices b. competitive pricing. c. prices above the monopoly price. d. an increase in the coefficient of variation of prices. e. stable prices 66. Barometric price leadership exists when a. one firm in the industry initiates a price change and the others follow it as a signal of changes in cost or demand in the industry. b. one firm imposes its best price on the rest of the industry. c. all firms agree to change prices simultaneously. d. one company forms a price umbrella for all others. e. the firms are all colluding. 67. In barometric price leadership, one firm announces a change in price a. and the other firms follow b. but the other firms refuse to follow c. that it hopes will be accepted by others d. which is merely a test of the market e. none of the above. 68. Regarding price leadership, which of the following is NOT true? a. one firm may establish itself as the dominant firm b. the dominant firm is frequently a larger size or has lower cost structure c. Price leadership is a model of price-output determination d. Once established, a barometric price leader will not change e. price leadership is a pricing strategy followed in many oligopolistic industries 69.All of the following are possible ways to avoid price wars EXCEPT: a. customer segmentation with revenue management b. growing the market c. reference prices and framing effects d. to not start one e. a through c f. a through d