multiple-choice questions on Oligopoly, Imperfect Market, Duopoly, and Monopolistic Competition, along with their answers
1. **Oligopoly and Price Leadership**:
Question: Which type of price leadership occurs when one dominant firm sets the price, and other firms in the oligopoly follow suit without explicit agreements?
a) Collusive price leadership
b) Predatory pricing
c) Perfect competition
d) Monopoly pricing
Answer: a) Collusive price leadership
2. **Imperfect Market and Government Regulation**:
Question: In imperfect markets, what is one role of government regulation?
a) To promote collusion among firms
b) To maximize consumer surplus
c) To prevent anti-competitive behavior
d) To eliminate all entry barriers
Answer: c) To prevent anti-competitive behavior
3. **Duopoly and Cournot Model**:
Question: In the Cournot duopoly model, what happens to a firm's output if it believes the other firm will decrease its production?
a) It increases its output.
b) It decreases its output.
c) It maintains its output.
d) It exits the market.
Answer: c) It maintains its output.
4. **Monopolistic Competition and Short-Run Profit Maximization**:
Question: In the short run, when a firm in monopolistic competition earns economic profit, what is the relationship between price and average total cost?
a) Price equals average total cost
b) Price exceeds average variable cost
c) Price exceeds marginal cost
d) Price exceeds average total cost
Answer: d) Price exceeds average total cost
5. **Oligopoly and Cartels**:
Question: What is the primary challenge for maintaining a successful cartel in an oligopoly market?
a) Effective price leadership
b) Preventing price wars
c) Ensuring perfect competition
d) Enforcing cooperation among member firms
Answer: d) Enforcing cooperation among member firms
6. **Imperfect Market and Product Differentiation**:
Question: What is the main goal of product differentiation in an imperfect market?
a) To reduce market power
b) To create homogeneous products
c) To achieve perfect competition
d) To make products less attractive
Answer: a) To reduce market power
7. **Duopoly and Price Competition**:
Question: In a duopoly using the Bertrand model, what strategy do firms follow when deciding their prices?
a) Quantity collusion
b) Price collusion
c) Price leadership
d) Price competition
Answer: d) Price competition
8. **Monopolistic Competition and Long-Run Equilibrium**:
Question: In the long run, what happens to economic profit for a firm in monopolistic competition?
a) Economic profit always increases.
b) Economic profit always decreases.
c) Economic profit is zero.
d) Economic profit fluctuates randomly.
Answer: c) Economic profit is zero.
9. **Oligopoly and Price Wars**:
Question: What is a potential consequence when firms in an oligopoly engage in aggressive price competition?
a) Collusion
b) Increased consumer surplus
c) A price war leading to lower profits
d) Perfect competition
Answer: c) A price war leading to lower profits
10. **Imperfect Market and Barriers to Entry**:
Question: What are examples of natural barriers to entry in an imperfect market?
a) Patents and government regulations
b) Economies of scale and brand loyalty
c) Collusion and cartel formation
d) Perfect competition and price discrimination
Answer: b) Economies of scale and brand loyalty
11. **Oligopoly and Game Theory**:
Question: In the prisoner's dilemma scenario within an oligopoly, what is the rational choice for each firm, even though the joint outcome could be suboptimal?
a) Cooperation
b) Collusion
c) Price competition
d) Self-interest
Answer: d) Self-interest
12. **Imperfect Market and Government Regulation**:
Question: In imperfect markets, what is one role of government regulation?
a) To promote collusion among firms
b) To maximize consumer surplus
c) To prevent anti-competitive behavior
d) To eliminate all entry barriers
Answer: c) To prevent anti-competitive behavior
13. **Duopoly and Cournot Model**:
Question: In the Cournot duopoly model, what happens to a firm's output if it believes the other firm will decrease its production?
a) It increases its output.
b) It decreases its output.
c) It maintains its output.
d) It exits the market.
Answer: c) It maintains its output.
14. **Monopolistic Competition and Short-Run Profit Maximization**:
Question: In the short run, when a firm in monopolistic competition earns economic profit, what is the relationship between price and average total cost?
a) Price equals average total cost
b) Price exceeds average variable cost
c) Price exceeds marginal cost
d) Price exceeds average total cost
Answer: d) Price exceeds average total cost
15. **Oligopoly and Cartels**:
Question: What is the primary challenge for maintaining a successful cartel in an oligopoly market?
a) Effective price leadership
b) Preventing price wars
c) Ensuring perfect competition
d) Enforcing cooperation among member firms
Answer: d) Enforcing cooperation among member firms
16. **Imperfect Market and Product Differentiation**:
Question: What is the main goal of product differentiation in an imperfect market?
a) To reduce market power
b) To create homogeneous products
c) To achieve perfect competition
d) To make products less attractive
Answer: a) To reduce market power
17. **Duopoly and Price Competition**:
Question: In a duopoly using the Bertrand model, what strategy do firms follow when deciding their prices?
a) Quantity collusion
b) Price collusion
c) Price leadership
d) Price competition
Answer: d) Price competition
18. **Monopolistic Competition and Long-Run Equilibrium**:
. Question: In the long run, what happens to economic profit for a firm in monopolistic competition?
a) Economic profit always increases.
b) Economic profit always decreases.
c) Economic profit is zero.
d) Economic profit fluctuates randomly.
Answer: c) Economic profit is zero.
19. **Oligopoly and Price Wars**:
Question: What is a potential consequence when firms in an oligopoly engage in aggressive price competition?
a) Collusion
b) Increased consumer surplus
c) A price war leading to lower profits
d) Perfect competition
Answer: c) A price war leading to lower profits
20. **Imperfect Market and Barriers to Entry**:
Question: What are examples of natural barriers to entry in an imperfect market?
a) Patents and government regulations
b) Economies of scale and brand loyalty
c) Collusion and cartel formation
d) Perfect competition and price discrimination
Answer: b) Economies of scale and brand loyalty
21. **Duopoly and Stackelberg Model**:
Question: In the Stackelberg duopoly model, what distinguishes the two firms' decision-making?
a) Both firms make simultaneous quantity decisions.
b) The leader firm sets its output first, and the follower firm observes and reacts.
c) Both firms set their prices simultaneously.
d) The follower firm sets its price first, and the leader firm observes and reacts.
Answer: b) The leader firm sets its output first, and the follower firm observes and reacts.
.
22. **Monopolistic Competition and Product Differentiation**:
Question: What is a key strategy used by firms in monopolistic competition to achieve product differentiation?
a) Offering identical products
b) Focusing on low prices
c) Making products more homogeneous
d) Creating unique features or branding
Answer: d) Creating unique features or branding
23. **Oligopoly and Price Leadership**:
Question: What is tacit collusion, and why is it challenging to detect and regulate?
a) It involves explicit agreements among firms to set prices.
b) It is an open form of collusion that is easy to detect.
c) It is an informal coordination of prices without explicit agreements.
d) It results in perfect competition.
Answer: c) It is an informal coordination of prices without explicit agreements.
24. **Imperfect Market and Natural Monopoly**:
Question: What type of market structure is characterized by a single firm being the most efficient producer, resulting in no room for competition?
a) Oligopoly
b) Monopoly
c) Natural monopoly
d) Perfect competition
Answer: c) Natural monopoly
25. **Duopoly and Price Rigidity**:
Question: Why might firms in a duopoly exhibit price rigidity, where they are reluctant to change prices frequently?
a) To maximize profits through price leadership
b) To minimize competition
c) To avoid triggering price wars
d) To achieve perfect competition
Answer: c) To avoid triggering price wars
26. **Monopolistic Competition and Short-Run Equilibrium**:
Question: In the short run, when a firm in monopolistic competition earns economic profit, what is the relationship between price and average total cost?
a) Price equals average total cost
b) Price exceeds average variable cost
c) Price exceeds marginal cost
d) Price exceeds average total cost
Answer: d) Price exceeds average total cost
27. **Oligopoly and Game Theory**:
Question: In the repeated prisoner's dilemma game played by oligopolistic firms, what strategy can encourage cooperation and discourage cheating?
a) Tit-for-tat
b) Perfect competition
c) Monopoly pricing
d) Price discrimination
Answer: a) Tit-for-tat
28. **Imperfect Market and Monopsony**:
Question: In an imperfect market, what is the term for a situation where there is a single buyer with significant market power?
a) Oligopsony
b) Monopoly
c) Monopsony
d) Perfect competition
Answer: c) Monopsony
29. **Duopoly and Collusion**:
Question: What is the primary incentive for firms in a duopoly to collude and coordinate their pricing strategies?
a) To increase competition
b) To maximize joint profits
c) To
achieve price leadership
d) To encourage price wars
Answer: b) To maximize joint profits
. 30. **Monopolistic Competition and Market Entry**:
Question: In monopolistic competition, what is a potential consequence of low entry barriers for new firms?
a) Increased price competition
b) A decrease in consumer choice
c) Higher prices for consumers
d) Reduced product variety
Answer: d) Reduced product variety
I hope these additional questions are helpful for your purposes! If you need more or have specific requests, please let me know.
