Which of the following statements is incorrect. In oligopoly, ________.

A. barriers to entry prevent new firms entering

B. each firm’s profit is influenced by each other firms’ advertising

C. each firm’s action is influenced by the actions and reactions of each other firm

D. each firm is a price taker and the price is the monopoly profit-maximizing price

In the prisoners’ dilemma game, each player ________.

A. consults the other player to determine his best action B. chooses the best outcome for the other player C. chooses the best outcome for himself D. chooses the best outcome for both players together

If firms in oligopoly form a cartel, it will likely break down because ________.

A. firms cannot agree on how to share the economic profit

B. the price set by the cartel is too low

C. with price exceeding marginal cost, a firm might expand production to increase its profit

D. firms realize that their allocation of resources is inefficient

Conjugate the verb in the passive voice and give the Latin passive infinitive with its meaning: firmo, firmare, firmavi, firmatum

A firm in monopolistic competition that is maximizing profit ________.

A. always makes a positive economic profit in the short run

B. never needs to shut down because its price always exceeds minimum average variable cost

C. might, in the short run, sell at a price that is less than average total cost

D. shuts down temporarily if it incurs a loss equal to total variable cost

Monopolistic competition differs from ________. A. monopoly because firms cannot set their own price B. oligopoly because firms produce differentiated goods or services C. perfect competition because the goods or services produced are differentiated D. monopoly because the good produced by each firm has no close substitute

The four largest firms in a market have the following market shares of total revenue: 20 percent, 15 percent, 10 percent, and 5 percent. The ________ in this industry is ________. A. four-firm concentration ratio; 50 percent B. four-firm concentration ratio; 750 percent C. Herfindahl-Hirschman Index; 50 D. Herfindahl-Hirschman Index; 2,500

When floods wiped out the banana crop in Central America, the equilibrium price of bananas ________ and the equilibrium quantity of bananas ________.

A. rose; increased

B. rose; decreased

C. fell; increased

D. fell; decreased

Read Eye On the Wireless Oligopoly on p. 475 and then explain the effects of economies of scale and demand on the market for smartphone plans and illustrate it with a graph based on Figure 18.1.

Which of the following items is not a factor of production?

A. An oil rig in the Gulf of Mexico

B. A ski jump in Utah

C. A bank loan to a farmer

D. An orange grove in Florida

In the market for used cars with no warranties, ______ lemons are bought and the equilibrium is a ______ equilibrium.

A. too few; separating

B. too many; separating

C. only; pooling

D. no; pooling

Find the total cost of grass seed for each of these lawns. Use the chart to help you.

$$\begin{aligned} \begin{array}{lccc} \textbf{Area of Lot} && \textbf{Area of House and Driveway} && \textbf{Variety of Seed}\\ 2,010\ \text{m}^2 && 70\ \text{m}^2 && \mathrm{D} \end{array} \end{aligned}$$

Read Eye on Smartphones on p. 451 and explain why smartphone producers offer such a large variety of their products. Draw a graph of a firm’s cost and revenue curves if all smartphones are identical. Use your graph to illustrate the effects of the firm introducing a new, differentiated smartphone.

A firm in monopolistic competition maximizes its profit by ________.

A. differentiating its good and producing the quantity at which price equals marginal revenue

B. producing the quantity at which marginal revenue equals marginal cost and then adding a markup

C. raising its price and producing so that it always has excess capacity

D. producing the quantity at which marginal cost equals marginal revenue and charging the highest price at which it can sell that quantity