Economics Quiz

A.P. Economics - Test #6 Review Name: __________________________ Date: _____________ ___ 1. A monopolistically competitive firm has a downward-sloping demand curve for its product, primarily because: A) there exist no barriers to entry or exit in the long run. B) there are many sellers in the industry. C) the firm sells a product distinct from products sold by competing firms. D) the price is greater than the marginal revenue. ___ 2. Which of the following is most likely to be observed when firms engage mainly in non-price competition? A) actively encouraging the sale of generic, as opposed to brand-name, products B) advertising and product differentiation C) discounts offered through coupons D) low interest rates for financing the purchase
Economics - Test #6 Review ___ 12. Which of the following characteristics make an industry more conducive to collusive behavior? A) Firms in the industry have very different marginal costs of production. B) Firms in the industry produce goods with significantly different product attributes. C) Firms in the industry are currently operating at a maximum productive capacity that cannot be easily altered in the short run. D) Firms in the industry serve customers that can easily switch between firms as they search for the best price. ___ 13. Gary's Gas and Frank's Fuel are the only two providers of gasoline in Smalltown. Gary and Frank decide to form a cartel to raise the price of gasoline. The total industry profits are highest when ________ and Gary's profits are highest when ________. A) neither firm cheats on the agreement; neither firm cheats on the agreement B) neither firm cheats on the agreement; Gary cheats on the agreement and Frank does not cheat C) both firms cheat on the agreement; Gary cheats on the agreement and Frank does not cheat D) both Gary and Frank cheat on the agreement; both Gary and Frank cheat on the agreement ___ 14. The kinked demand model of an oligopoly explains why some oligopolists raise prices immediately when they experience an increase in marginal costs. A) True B) False ___ 15. Suppose a monopolistically competitive firm is making a profit, but it can increase its profits by increasing output. Then it must be the case that at the current
Economics - Test #6 Review ___ 17. (Figure: The Market for Gas Stations) The figure shows curves facing a typical gas station in a large town. Assume that the market is characterized by many firms, differentiated products, easy entry, and easy exit. If the gas station shown here were to raise its price above the profit-maximizing price, it would experience: A) a reduction in total revenue. B) an increase in total revenue. C) no change in total revenue. D) Not enough information is given to answer the question. Figure: Comparing Long-Run Equilibriums

___ 18. (Figure: Comparing Long-Run Equilibriums) In the figure, which of the following statements is false? A) The firm in panel (a) produces where price equals marginal cost, and thus it maximizes profit and breaks even. B) The firm in panel (b) produces where price equals marginal cost, and thus it maximizes profit and breaks even. C) The firm in panel (b) produces where price equals average cost, and thus it maximizes profit and breaks even. D) The firm in panel (a) produces where price equals average cost, and thus it maximizes profit and breaks even. Figure: Firms in Monopolistic