Multiple Choice Questions
1. Monopolistically competitive firms use a(n) ________ strategy to achieve market power.
product differentiation
dominant
maximin
opportunistic behavior
2. A(n) ________ occurs if all players in a game play their best strategies given what their competitors do.
dominant strategy
Nash equilibrium
prisoner's dilemma
tit-for-tat strategy
3. A monopolistically competitive firm that is incurring a loss will shut down if
marginal revenue is less than marginal cost.
revenues are less than variable costs.
price is less than average total cost.
price is less than marginal cost.
4. The ________ is the share of industry output in sales or employment accounted for by the largest four firms in an industry.
concentration ratio
contestability ratio
competitive index
collusive level
5. For a monopolist to sell more units of output,
the price must be increased.
the price must be reduced.
demand must become more elastic.
the other competing firms must sell fewer units.
6. ________ is a repeated game strategy in which a player responds in kind to an opponent's play.
Maximin
Tit-for-tat
Prisoner's dilemma
Price leadership
7. A(n) ________ industry is characterized by strategic behavior.
perfectly competitive
monopolistic
monopolistically competitive
oligopolistic
8. To maximize profit, a monopolistically competitive firm will produce where
marginal revenue equals price.
price equals marginal cost.
price equals average total cost.
marginal revenue equals marginal cost.
9. Firms with market power must decide all of the following EXCEPT
how much to supply in each input market.
how much to produce.
how to produce it.
what price to charge for their output.
10. Which one of the following is NOT a source of market failure?
externalities.
public goods.
imperfect information.
price ceilings.