• 1
  • In monopolistic competition in the long run, firms ______________________.

    incur an economic loss and require more capacity
    make an economic profit and have excess capacity
    make a normal profit and have excess capacity
    make a normal profit and require more capacity

  • 2
  • Advertising costs are _______ costs and the per unit cost _______ as production increases.

    fixed; decreases
    variable; does not change
    variable; increases
    fixed; increases

  • 3
  • In the kinked demand curve model of oligopoly, demand for the good is _______ elastic at prices below the current price because if one firm lowers the price, other firms will _______ their prices.

    less; lower
    more; raise
    less; raise
    more; lower

  • 4
  • In a dominant firm oligopoly, the dominant firm __________ and produces the output at which _________ equals _________. The smaller firms in the market are _______.

    acts like a monopoly; marginal revenue; marginal cost; price takers
    acts like a monopoly; revenue; opportunity cost; price takers
    is competitive; marginal revenue; marginal cost; monopolistic
    acts like a monopoly; total revenue; total cost; price takers

  • 5
  • John von Neumann and Oskar Morgenstern are the inventors of ___________________.

    game theory
    the Nash equilibrium
    duopoly theory
    oligopoly theory

  • 6
  • When producers agree to produce less so that they can raise prices and make larger profits, the agreement is called ________________.

    a collusive agreement
    a monopoly agreement
    a pricing agreement
    an oligopoly agreement

  • 7
  • _______ is a group of firms that have made a collusive agreement.

    A cartel
    A strategy
    A duopoly
    An oligopoly

  • 8
  • In a repeated game, punishments that result in heavy damages are an incentive for players to adopt the strategies that result in a _______ equilibrium.


  • 9
  • A firm in a contestable market __________________.

    makes an economic profit
    makes an economic revenue
    makes a normal profit
    incurs an economic loss

  • 10
  • Limit pricing _______ the market by convincing them that they will ___________________ in the industry.

    deters potential firms from entering; incur an economic loss
    encourages potential firms to enter; make a normal profit
    encourages potential firms to enter; make an economic profit
    deters potential firms from entering; make only normal profit

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