CHAPTER 34
Monopolistic Competition and Oligopoly
368. What is monopolistic competition?
a. monopolistic competition means there is only one seller in an industry.
b. monopolistic competition means all firms in an industry combine together to act like a
monopoly
c. monopolistic competition means a monopolist begins to act competitively
d. monopolistic competition means there is only one seller of a particular brand in an
industry with many similar products.
369. A monopolistically competitive firm gains advantage over other firms by
a. selling its product at a lower price than its competitors..
b. convincing customers that its product is exactly the same as others on the market.
c. convincing customers that its product is significantly different from others on the market.
d. producing at a lower cost than its competitors.
370. Compared to a firm operating in a perfectly competitive market, a firm in monopolistic
competition
a. produces more output at a higher price.
b. produces less output at a lower price.
c. produces less output at a higher price.
d. produces more output at a lower price.
371. Which of the following is an example of monopolistic competition?
a. Shell Oil company
b. the Shell gas station at 24th and Vine.
c. Generic, Inc., a grocery store in Albuquerque, New Mexico that sells only generics and
items with no brand name.
d. Wal-Mart
372. What is oligopoly?
a. oligopoly means there is many first in an industry selling slightly differentiated products.
b. oligopoly means there are many small firms selling homogenous products.
c. oligopoly means a few business firms dominate an industry.
d. oligopoly means there is only one seller of a particular brand in an industry with many
similar products.
373. When would it be most advantageous for an oligopolist to raise its price?
a. when the firm can be sure that other firms will also raise their prices.
b. when the firm can be sure that other firms will not raise their prices.
c. when the firm faces rising costs.
d. when the firm faces declining demand.
374. In the long run, a perfectly competitive firm will make zero excess profits. In the long run,
oligopolies
a. also make zero excess profits.
b. normally make excess profits.
c. only the dominant firm makes excess profits, follower firms make zero excess profits.
d. the dominant firm makes zero excess profits, but follower firms will make excess profits.
375. Which of the following is an example of oligopoly?
a. independent clothing store located in Decatur, Illinois.
b. the Shell gas station at 24th and Vine.
c. Generic, Inc., a grocery store in Albuquerque, New Mexico that sells only generics and
items with no brand name.
d. Wal-Mart
376. What is a cartel?
a. a cartel is a group of consumers that get together to buy products in large quantities at
substantial discounts.
b. a cartel is a group of commuters who take turns driving together to work.
c. a cartel is a group of firms that acts as a monopoly.
d. a cartel is a group of people who get together to sell illegal substances.
377. Neoclassical economists argue that cartels will eventually break apart because
a. individual producers will have an incentive to charge higher prices in order to attract
more customers.
b. individual producers will have an incentive to produce more in order to take advantage of
higher prices.
c. individual producers will have an incentive to charge higher prices in order to increase
profits.
d. cartels are now illegal in all countries.