tbch13 - CHAPTER 13 Oligopoly and Monopolistic Competition...

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CHAPTER 13 Oligopoly and Monopolistic Competition MULTIPLE CHOICE Choose the one alternative that best completes the statement or answers the question. 1) Perfect competition and monopolistic competition are similar in that both market structures include A) price-taking behavior by firms. B) a homogeneous product. C) no barriers to entry. D) very few firms. Answer: C Diff: 1 Topic: Market Structures 2) Perfect competition and monopolistic competition are similar in that firms in both types of market structure will A) act as price takers. B) produce a level of output where price equals marginal cost. C) earn zero profit in the long run. D) act as price setters. Answer: C Diff: 1 Topic: Market Structures 3) Oligopoly differs from monopolistic competition in that an oligopoly includes A) product differentiation. B) barriers to entry. C) no barriers to entry. D) downward-sloping demand curves facing the firm. Answer: B Diff: 1 Topic: Market Structures 4) Regardless of market structure, all firms A) consider the actions of rivals. B) maximize profit by setting marginal revenue equal to marginal cost. C) produce a differentiated product. D) have the ability to set price. Answer: B Diff: 1 Topic: Market Structures Figure 13.1 1
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5) Figure 13.1 shows a payoff matrix for two firms, A and B, that must choose between a high- price strategy and a low-price strategy. For firm B, A) setting a high price is the dominant strategy. B) setting a low price is the dominant strategy. C) there is no dominant strategy. D) doing the opposite of firm A is always the best strategy. Answer: B Diff: 1 Topic: Game Theory 6) Figure 13.1 shows a payoff matrix for two firms, A and B, that must choose between a high- price strategy and a low-price strategy. The Nash equilibrium in this game A) does not exist. B) occurs when both firms set a low price. C) occurs when both firms set a high price. D) occurs when firm A sets a high price and firm B sets a low price. Answer: B Diff: 1 Topic: Game Theory 7) Figure 13.1 shows a payoff matrix for two firms, A and B, that must choose between a high- price strategy and a low-price strategy. Both firms setting a high price is not a Nash equilibrium because A) setting a high price is the dominant strategy for each firm. B) neither firm can improve its payoff by setting a low price given that the other firm is setting a high price. C) there is no dominant strategy for either firm. D) both firms can improve their payoff by setting a low price given that the other firm is setting a high price. Answer: D Diff: 1 Topic: Game Theory Figure 13.2 8) Figure 13.2 shows a payoff matrix for two firms, A and B, that must choose between selling basic computers or advanced computers. Firm B's dominant strategy A) is to make basic computers. B) is to make advanced computers.
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This note was uploaded on 12/27/2011 for the course FBAE 201 taught by Professor Eefwf during the Spring '11 term at Institute of Technology.

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tbch13 - CHAPTER 13 Oligopoly and Monopolistic Competition...

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