Multiple-choice questions - choose the best answer

1. Suppose Wave detergent is sold in a monopolistically competitive market. If the price of Wave detergent is currently $6 and the ATC is $4, in the long-run we expect

a. The demand curve for Wave to shift to the left

b. The demand curve for Wave to shift to the right

c. The producers of Wave to go out of business

d. The producers of Wave to earn economic profits greater than zero

e. The producers of Wave to earn economic losses

2. For the noncolluding oligopolist, there are two factors that affect the decision to raise production.

These factors are

a. the output effect and the price effect.

b. the cost effect and the price effect.

c. the production effect and the output effect.

d. the output effect and the cost effect.

3. Compared to perfectly competitive firms, oligopolies are

a. more likely to consider the actions of other firms

b. less likely to consider the actions of other firms

c. neither more nor less likely to consider the actions of other firms

d. likely to produce more than the socially optimal amount of output

4. A firm cannot price discriminate if it

a. has perfect information about consumer demand.

b. operates in a competitive market

c. faces a downward-sloping demand curve.

d. is regulated by the government.

5. In the long run, there will be no unexploited scale economies (excess capacity) in

a. competitive markets

b. monopolistically competitive markets

c. oligopoly markets

d. monopoly markets

6. A market force that can prevent firms from price discriminating is

a. arbitrage.

b. fluctuating resource prices.

c. high fixed costs.

d. all of the above.

7. As a group, oligopolists would always be best off if they would

a. produce more than the perfectly competitive quantity of output.

b. charge the same price that a monopolist would charge if the market were a monopoly.

c. produce the perfectly competitive quantity of output.

d. operate according to their own individual self-interests.

8. A perfectly price-discriminating monopolist is able to

a. exercise illegal preferences regarding the race and/or gender of its employees.

b. maximize profit and produce a socially-optimal level of output.

c. maximize profit, but not produce a socially-optimal level of output.

d. produce a socially-optimal level of output, but not maximize profit.