### Microeconomics Practice Set - 10: Price and Output Under Monopolistic Competition and Oligopoly

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1. In monopolistic competition, we have

1. few firms selling a differentiated product

2. many firms selling a homogeneous product

3. few firms selling a homogeneous product

4. many firms selling a differentiated product

2. The short-run equilibrium level of output for a monopolistic competitor is given by the point where

1. P = SMC

2. P = SAC

3. the MR curve intersects the SMC curve

4. the MR curve intersects the SMC curve from below and $$P \ge AVC$$

3. The short-run supply curve of the monopolistic competitor

1. cannot be defined

2. cannot be defined, (b) is given by the rising portion of monopolistic competitor’s SMC curve

3. is given by the rising portion of monopolistic competitor’s SMC curve over and above AVC

4. can be defined only if factor prices remain constant

4. When the industry is in long-run equilibrium, the monopolistic competitor will produce at the lowest point on its LAC curve

1. Always

2. never

3. sometimes

4. cannot say

5. Which of the following most closely approximates our definition of oligopoly?

1. The cigarette industry

2. the barber shops in a city

3. the gasoline stations in a city

4. wheat farmers in the midwest

6. With reference to the Cournot model, determine which of the following statements is false

1. The duopolists do not recognize their interdependence

2. Each duopolist assumes the other will keep its quantity constant

3. Each duopolist assumes the other will keep its price constant

4. The solution is stable

7. With reference to the Edgeworth model, determine which of the following statements is correct

1. The duopolists recognize their interdependence

2. It explains price rigidity

3. Each duopolist assumes the other keeps its price constant

4. Each duopolist assumes the other keeps its quantity constant

8. In both the Chamberlin and the kinked demand curve models, the oligopolists

1. recognize their interdependence

2. do not collude

3. tend to keep prices constant

4. all of the above

9. The centralized cartel

1. leads to the monopoly solution

2. behaves as the multiplant monopolist if it wants to minimize the total costs of production

3. is illegal in the U.S.

4. all of the above

10. A market-sharing cartel will reach the monopoly solution

1. sometimes

2. always when the product is homogeneous

3. always when the product is differentiated

4. never

11. In the case of price leadership by the dominant firm, all the firms in the purely oligopolistic industry will produce their best level of output

1. Always

2. never

3. sometimes

4. often

12. If an oligopolist incurs losses in the short run, then in the long run

1. the oligopolist will go out of business

2. the oligopolist will stay in business

3. the oligopolist will break even

4. any of the above is possible