If in monopolistic competition in the short run, firms make ______________ profits, then in the long run, new firms will enter the market. The _________ each individual firm's product will __________. In the new long-run equilibrium firms will make _______ profit.

economic; demand for; decrease; zero economic
normal; demand for; increase; normal
economic; supply of; increase; zero economic
economic; supply of; decrease; positive economic

At a firm's current level of product development, marginal revenue is greater than the marginal cost. The firm will ________________.

decrease product development
sell only new products
increase product development only if the consumer benefits
increase product development

Average total cost ____________________.

can be lowered if advertising increases the quantity sold by a large enough amount
can be lowered if advertising decreases the quantity sold by a large enough amount
is a variable cost and is not affected by advertising which is a fixed cost
is not lower when a firm advertises because advertising increases costs

In the kinked demand curve model, firms will not change their price when marginal cost changes as long as the ________________________.

marginal cost curve continues to pass through the break in the marginal revenue curve
marginal cost curve always has the same slope
marginal cost and marginal revenue curves intersect
demand curve does not shift

Kevin and Pat have been arrested by the police during a robbery at a computer store. If convicted, each will receive a sentence of 5 years for the robbery. During questioning, the police suspect that Kevin and Pat are responsible for an arson attack on the local bingo hall. If both confess to the arson, each will receive 10 years in jail. If only one confesses, he will receive 4 years and the one who does not confess will receive 18 years. What is the equilibrium for this game?

both confess
Pat confesses and Kevin does not confess
neither confess
Kevin confesses and Pat does not confess

In the Prisoners' Dilemma game, the equilibrium is always a _______ equilibrium.

collusive
dominant strategy
competitive
prisoners' dilemma

The maximum economic profit that can be made by a duopoly that colludes is equal to the _____________________.

economic profit made by a monopoly
economic profit made by duopolists who cheat
normal profit made by firms in perfect competition
normal profit made by an oligopoly

In a duopoly with a collusive agreement, a firm's best strategy is to_______ if the other firm_______ and to_______ if the other firm _______.

comply; complies; cheat; cheats
comply; complies; comply; cheats
cheat; complies; cheat; cheats
comply; cheats; cheat; complies

A cartel will make the same economic profit that a monopoly would make if the ______________________.

game is repeated and a tit-for-tat strategy is in place
cartel plays the game once and a tit-for-tat strategy is in place
game is played once
cartel spends money on research and development

Firms in monopolistic competition and oligopoly _____________________.

charge a price equal to marginal cost
charge a price that equals marginal revenue
produce the revenue-maximizing output
produce the profit-maximizing output

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