In an oligopoly industry, price:
a. will be lower than the competitive price, due to cost savings.
b. will exceed the monopoly price, due to the destructiveness of competitive forces.
c. cannot be predicted exactly, because it is likely to lie between the competitive and monopoly prices.
d. none of these.
QUESTION 2Normal profit is a term for:
a. explicit profit.
b. the minimum profit to keep a firm in operation.
c. the accounting profit forgone.
d. pure economic profit.
QUESTION 3Which of these faulty economic policies was adopted by President Hoover during the Great Depression?
a. An increase in tax rate
b. An increase in trade barriers
c. A decrease in tax rate
d. A decrease in government spending
e. An increase in government spending
QUESTION 4A common characteristic of oligopolies is:
a. interdependence in pricing decisions.
b. independent pricing decisions.
c. low industry concentration.
d. few or no plant-level economies of scale.
QUESTION 5When total revenue minus total cost is equal to zero, the firm is:
a. earning above-average economic profit.
b. earning a normal profit.
c. losing too much money to stay in business.
d. earning abnormally low profits.
QUESTION 6If all firms expect greater demand for their products or services, they will hire _____ resources like labor and capital and the economy will experience _____.
a. fewer; recession
b. fewer; growth
c. more; deflation
d. more; recession
e. more; growth
QUESTION 7Mutual interdependence among firms in an oligopoly means that:
a. firms never practice price leadership.
b. firms never form a cartel.
c. it is difficult to know how firms will react to decisions of rivals.
d. no formal agreement is possible among firms.
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