Question 1

Which of the following is NOT a characteristic of an oligopoly market structure?

Accepted Answer

Firms are price takers with no market power.

Question 2

Refer to the payoff matrix for LimoZeenz (LZ) and AirPorter (AP). What is the Nash equilibrium in this game?

Accepted Answer

Both LZ and AP offer the discount.

Question 3

In perfect competition, the profit-maximizing output level is found where:

Accepted Answer

$$MR = MC$$

Question 4

If a perfectly competitive firm is producing at a price below average total cost but above average variable cost, what should the firm do in the short run?

Accepted Answer

Continue producing to cover variable costs and some fixed costs.

Question 5

Which of the following is a barrier to entry in an oligopoly?

Accepted Answer

Patents protecting existing firms.

Question 6

Suppose the market price for wheat falls due to the entry of new firms in a perfectly competitive industry. In the long run, what will happen to economic profits?

Accepted Answer

Economic profits will fall toward zero.

Question 7

In a monopolistically competitive market, what is the key feature that distinguishes it from perfect competition?

Accepted Answer

Product differentiation.

Question 8

Given the cost curve graph, if the market price is $$20, average total cost is 11$$, and the firm produces 300 units, what is the profit?

Accepted Answer

$$2700$$

Question 9

Which of the following best describes a firm in perfect competition?

Accepted Answer

The firm is a price taker.

Question 10

If the market price is $25, what is the average revenue of selling five units for a perfectly competitive firm?

Accepted Answer

$$25$$

Question 11

Which of the following would NOT be considered a barrier to entry?

Accepted Answer

Product differentiation.

Question 12

In the context of game theory, what is a dominant strategy?

Accepted Answer

A strategy that is best for a player, regardless of what the other player does.

Question 13

Which market structure is most likely to result in efficient outcomes where $$P = MC$$?

Accepted Answer

Perfect competition.

Question 14

If a monopolistically competitive firm is making losses in the short run, what is likely to happen in the long run?

Accepted Answer

Firms will exit, shifting the demand curve for remaining firms to the right.

Question 15

Which of the following is the profit-maximizing condition for all firms?

Accepted Answer

$$MR = MC$$

Question 16

In the context of the Five Competitive Forces Model, which force is most directly reduced by high barriers to entry?

Accepted Answer

Threat of new entrants.

Question 17

If a perfectly competitive firm is producing 240 units when the profit-maximizing output is 180 units, what should the firm do?

Accepted Answer

Reduce output to where $$MR = MC.$$

Question 18

Which of the following best explains why oligopolies are difficult to analyze?

Accepted Answer

Firms' responses to rivals' price changes are uncertain.

Question 19

In a monopolistically competitive market, how is profit calculated using the graph?

Accepted Answer

$$(P_2$ - P_3$) Q_a$$

Question 20

Which of the following is a real-world example of an oligopoly?

Accepted Answer

Oil companies (OPEC).

Microeconomics Exam 5 Review: Oligopoly, Perfect Competition, and Game Theory

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