Chap16 - ECON1001 Principles of Economics Homework: Chapter...

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ECON1001 Principles of Economics Homework: Chapter 16 Multiple Choice Identify the letter of the choice that best completes the statement or answers the question. ____ 1. A firm in a monopolistically competitive market is similar to a monopolist in the sense that it a. must overcome significant barriers to entry. b. faces a downward-sloping demand curve. c. has no barriers to entry or exit. d. it is only one seller of the good. ____ 2. The U.S. market for locomotives is divided between two producers: General Electric has 70 percent of the market and General Motors has 30 percent. This market is an example of a. monopolistic competition. b. a collusive monopoly. c. a duopoly. d. a cartel. ____ 3. The application of game theory to economics allows us to understand firm behavior in some forms of oligopoly. Game theory suggests that in a two-firm industry, each firm will a. avoid pricing high when the other prices low. b. select high prices and defend that selection because, in the long run, their profits are higher than if they competed by lowering prices. c. end up mistaking the other's intentions, which results in low prices and low profit for both in the long run. d. end up colluding with the other to form a cartel. ____ 4. There will be a greater tendency for cheating to take place with a cartel if a. the number of firms in the market is relatively small. b.
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Chap16 - ECON1001 Principles of Economics Homework: Chapter...

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