Quick Quiz


1	A monopolist's demand curve is:
		A)	perfectly inelastic
		B)	always inelastic.
		C)	the same as the market demand curve.
		D)	always elastic.
		E)	perfectly elastic.


2	A monopolistic competitor's demand curve is:
		A)	perfectly inelastic.
		B)	inelastic.
		C)	unit-elastic.
		D)	elastic.
		E)	perfectly elastic.


3	If an oligopolist in a market characterized by rivalry:
		A)	raises its price, then market competitors will tend to match this price rise.
		B)	lowers its price, then market competitors will tend to match this price drop.
		C)	lowers its price, then market competitors will tend to keep their prices the same.
		D)	raises its price, then market competitors will attempt to persuade it to reverse this price increase.
		E)	lowers its price, then market competitors will raise their prices.


4	Which of the following statements is false?
		A)	Some oligopolists operate in markets where rivalry prevails, while in other oligopolies firms choose to cooperate.
		B)	Any oligopolist must consider the actions of other firms in their market because of how these actions could affect the oligopolist's sales.
		C)	The demand curve faced by an individual oligopolist is kinked regardless of whether or not firms in the market behave as rivals.
		D)	Common forms of cooperation among oligopolists include price leadership and collusion.
		E)	Oligopolies are common in the Canadian economy.


5	For a monopolist, marginal revenue:
		A)	equals price.
		B)	is initially equal to price, then falls more quickly as new units of output are added by the firm.
		C)	is initially equal to price, then falls more slowly as new units of output are added by the firm.
		D)	represents the price of the last unit sold by the firm.
		E)	always equals marginal cost.


6	A monopolist is producing an output at which its marginal revenue is greater than its marginal cost. Meanwhile, its average cost exceeds its price. If the monopolist raises its output:
		A)	economic profits will increase.
		B)	economic profits will decrease.
		C)	economic losses will decrease.
		D)	economic losses will increase.
		E)	the monopolist will continue to break even.


7	If a monopoly is broken up into perfectly competitive businesses:
		A)	equilibrium price in the market will fall and equilibrium quantity will rise.
		B)	equilibrium price and quantity in the market will both fall.
		C)	equilibrium price and quantity in the market will both rise.
		D)	equilibrium price in the market will rise and equilibrium quantity will fall.
		E)	equilibrium price and quantity in the market will both stay the same.


8	Regulators of a natural monopoly commonly attempt to make the business charge a price equal to:
		A)	marginal cost.
		B)	average fixed cost.
		C)	average variable cost.
		D)	average cost.
		E)	marginal revenue.


9	In the long run, a profit- maximizing monopolistic competitor sells its product at a price which:
		A)	equals marginal cost but is greater than average cost.
		B)	equals average cost but is greater than marginal cost.
		C)	equals marginal cost but is less than average cost.
		D)	equals average cost but is less than marginal cost.
		E)	equals both marginal cost and average cost.


10	The kinked demand curve theory explains why:
		A)	rival oligopolists tend to vary prices frequently.
		B)	cooperating oligopolists try to maximize their joint profit.
		C)	monopolistic competitors charge a price equal to average cost in the long run.
		D)	monopolies are so uncommon in the Canadian economy.
		E)	rival oligopolists tend to keep prices constant.


11	Monopolists, monopolistic competitors and oligopolists are all alike in that their profit maximizing equilibrium:
		A)	achieves both the minimum- cost and marginal-cost pricing conditions.
		B)	achieves the minimum-cost pricing condition but not the marginal-cost pricing condition.
		C)	achieves the marginal-cost pricing condition but not the minimum-cost pricing condition.
		D)	achieves neither the minimum-cost nor the marginal-cost pricing conditions.
		E)	sometimes, though not always, achieves both the minimum-cost and marginal-cost pricing conditions.


12	Nonprice competition:
		A)	is common only in perfectly competitive markets.
		B)	is common only in monopolistically competitive and oligopolistic markets.
		C)	is common only in monopolies.
		D)	is common only in monopolistically competitive markets and monopolies.
		E)	is uncommon in imperfectly competitive markets.


13	The effect of advertising:
		A)	is uncertain for both businesses and consumers.
		B)	tends to be harmful for consumers and beneficial for businesses.
		C)	tends to be harmful for businesses and beneficial for consumers.
		D)	is uncertain for businesses while always harmful for consumers.
		E)	is uncertain for consumers while always harmful for businesses.


14	In the debate over industrial concentration:
		A)	defenders of big business argue that increasing returns to scale mean that large firms can have higher prices than small firms.
		B)	critics of big business argue that it is better to be a small firm when competing in the global marketplace.
		C)	defenders of big business argue that technical innovation is more common in small firms than in large firms.
		D)	those who oppose big business say that large firms are likely to have more market power than small firms.
		E)	critics of big business argue that technical innovation is more common in large firms than in small firms.


15	Joseph Schumpeter argued that:
		A)	oligopolistic markets can exhibit beneficial forms of competition.
		B)	capitalism will gradually be replaced with socialism.
		C)	the crucial player in capitalism is the entrepreneur.
		D)	economic growth takes place through a process of "creative destruction".
		E)	all of the above

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