管理经济学第七版英文教辅 chapter 9.docx

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1、Managerial Economics 7e (Keat)Chapter 9 Pricing and Output Decisions: Monopolistic Competition and Oligopoly (Appendix 9A)Multiple-Choice Questions1) Which of the following industries is most likely to represent the monopolistic competition market structure?A) automobilesB) tobacco productsC) restau

2、rantsD) farm equipmentAnswer: CDiff: 12) The main difference between perfect competition and monopolistic competition isA) the number of sellers in the market.B) the ease of exit from the market.C) the difference in the firms profits in the long run.D) the degree of product differentiation.Answer: D

3、Diff: 23) If firms are earning economic profit in a monopolistically competitive market, which of the following is most likely to happen in the long run?A) Some firms will leave the market.B) Firms will join together to keep others from entering.C) New firms will enter the market, thereby eliminatin

4、g the economic profit.D) Firms will continue to earn economic profit.Answer: CDiff: 24) Firms in monopolistic competition wouldA) persistently realize economic profits in both the short and long run.B) may realize economic profits in the long run and normal profits in the short run.C) tend to incur

5、persistent losses in both the short and long run.D) tend to realize economic profits in the short run and normal profits in the long run.Answer: DDiff: 25) In the long run, the most helpful action that a monopolistically competitive firm can take to maintain its economic profit is toA) continue its

6、efforts to differentiate its product.B) raise its price.C) lower its price.D) do nothing, because it will inevitably experience a decline in profits.Answer: ADiff: 36) Which of the following represents a good example of an oligopoly?A) the agriculture industryB) a public utilityC) the automobile ind

7、ustryD) the restaurant industryAnswer: CDiff: 17) In general, there is a(n)relationship between the height/strength of the barriers and the number of firms in an industry.A) directB) inverseC) constantD) randomAnswer: BDiff: 18) Mutual interdependence occurs whenA) all firms in an industry are affec

8、ted by the same macro economic conditions, such as a recession, inflation, interest rates, exchange rates, etc.B) the actions of firms are independent of each other.C) the actions of one firm in an industry are easily recognized and perhaps copied by others.D) monopolists recognize that they must fa

9、ce eventual competition in the long run.Answer: CDiff: 29) Mutual interdependence means thatA) all firms are price takers.B) each firm sets its own price based on its anticipated reaction by its competitors.C) all firms collaborate to establish one price.D) all firms are free to enter or leave the m

10、arket.Answer: BDiff: 210) The Herfindahl-Hirschman (HH) Index is used toA) measure the degree of nonprice competition.B) measure the degree of market concentration in an industry.C) measure the extent of price leadership.D) None of the aboveAnswer: BDiff: 111) The demand curve, which assumes that co

11、mpetitors will follow price decreases but not price increases, is calledA) an industry demand curve.B) an inelastic demand curve.C) a kinked demand curve.D) a competitive demand curve.Answer: CDiff: 112) The kinked demand curve model best reflectsA) mutual interdependence among sellers.B) a game the

12、ory approach to price-output decisions.C) price rigidities in oligopolistic markets.D) All of the aboveAnswer: DDiff: 313) In the kinked demand curve model, the demand curve is for price increases andfor price decreases.A) unit elastic; relatively elasticB) relatively inelastic; relatively elasticC)

13、 relatively elastic; relatively inelasticD) perfectly elastic; perfectly inelasticAnswer: CDiff: 314) The existence of a kinked demand curve under oligopoly conditions may result inA) price flexibility.B) price rigidity.C) competitive pricing.D) None of the aboveAnswer: BDiff: 115) When a company is

14、 faced by a kinked demand curve, the marginal revenue curveA) will be upward sloping.B) will be horizontal.C) will always be zero at the quantity produced.D) will be discontinuous.Answer: DDiff: 216) In which of these markets would the firms be facing the least elastic demand curve?A) perfect compet

15、itionB) pure monopolyC) monopolistic competitionD) oligopolyAnswer: BDiff: 217) Porters Five Forces Model1 is based onA) the laws of supply and demand.B) the law of diminishing returns.C) the Structure-Conduct-Performance model.D) the key factors affecting demand.Answer: CDiff: 118) The four-firm co

16、ncentration ratioA) indicates the total profitability among the top four firms in an industry.B) is an indicator of the degree of monopolistic competition.C) indicates the presence and intensity of an oligopoly market.D) is used by the government as a basis for anti-trust cases.Answer: CDiff: 2Analy

17、tical Questions1) Convenience stores with gas stations tend to sell an essentially identical variety of products and services. Yet this is generally considered to be a monopolistically competitive industry selling differentiated products. How can this be considered a differentiated product?Answer: T

18、hese stores are differentiated by location.2) Describe the transition from short-run to long-run equilibrium in a monopolistically competitive industry.Answer: In the short run, firms in a monopolistically competitive industry may make a positive profit. However, since there are assumed to be no sig

19、nificant barriers to entry, positive profits attract entry. As more firms (or varieties) enter, the demand for each firm (or variety) decreases, and thus prices and profits fall until there is no further incentive for entry.3) How is a monopolistically competitive industry like perfect competition?

20、How is it like monopoly?Answer: Monopolistic competition is like perfect competition in that there are many firms and no barriers to entry (and thus long-run economic profits will be zero). It is like monopoly in that firms sell products that are not perfect substitutes for each other, and thus firm

21、s have some market power, and prices will be above marginal cost.4) Why might a concentration ratio be a poor measure of actual industry competition?Answer: Concentration ratios measure national competition within a line of products that are substitutes in production. Where there is much internation

22、al competition, where competition is regional rather than national, where there is competition from products that are substitutes in consumption but not production, and for other reasons listed in the text, competition ratios may be poor measures of competition.5) When one automaker begins offering

23、low cost financing or rebates, others tend to do the same. What two oligopoly models might offer an explanation of this behavior?Answer: (1) Kinked demand curve: the assumption behind the kinked demand curve model is that rivals follow price decreases but not price increases. One automaker offering

24、rebates, etc., is essentially a price cut, and so others will follow. (2) Price leadership: This could also be viewed as a price leader setting a new price and others following.6) Restaurants cluster together. That is, on one corner, there may be four similar fast-food restaurants. How can this be e

25、xplained using a location game theory model?Answer: Similar to the beach kiosk model, restaurants cluster because they attract the most customers that way. One explanation might be: assume that customers have identical transportation costs, are distributed uniformly, and have no preference for one r

26、estaurant over another. Then they will always go to the closest restaurant. If one is located far away from the other, it would attract customers on the other side of it, but only half of the ones between it and its rival. If it locates next to its rival, it gets all the customers on that side, and

27、thus maximizes profit.7) Microsoft has integrated many components into its Windows operating systems, such as a web browser, media player, etc. How might this be an example of nonprice competition?Answer: There are a number of possible answers, including enhancing the attributes of the product (incr

28、easing demand), increasing switching costs to increase customer loyalty (reduce elasticity), etc.8) Describe the factors in Michael Porters Five Forces Model1 that affect the ability of any firm in an industry to earn a profit.Answer: Threats of new entrants into the industry, bargaining power of a

29、Erms customers, bargaining power of a firms suppliers, threats of substitute products from other industries, and intramarket rivalry from other firms in the industry.9) Describe the structure-conduct-performance (S-C-P) paradigm.Answer: An analytical approach to examining the structure of an industr

30、y and how it affects firm profitability. It holds that the types of products being sold, their price elasticities of demand, the methods used to produce them (especially the role of technology and the existence of scale economies), and the degree to which there are related products (complements and

31、substitutes) will determine the number of firms in the industry, conditions of firm entry and exit, and the extent of product differentiation. The resultant industry structure determines firm price-output and non-pricing strategies which, in turn, determine the degree of firm profitability.10) Expla

32、in why the nkinked demand curve model of oligopoly represents a game theory approach to oligopolistic behavior.Answer: Game theory usually is defined as studying how individuals form strategies when they are aware that their decisions affect the decisions of other which, in turn, will affect the out

33、come of their decisions. The kinked demand curve1 model is based on how firms perceive their competitors will react to any changes they make in their product prices, and how the expected reactions by competitive firms will affect firm profitability.The typical assumption is that if the firm raises i

34、ts product price, competitors will not raise their prices so that the firm will experience such a decrease in quantity sold that their total revenue and profit will decline. However, if the firm lowers its product price, competitors will match the price decrease so that the firm gains little or no increase in quantity sold, resulting in a decline in total revenue and profit. Under this expected behavior by competitors, firms should not alter their product prices in response to small changes in product costs.