The figure shows the cost, marginal revenue, and demand curves of Golden Chow, a producer of dog food. The market for dog food is monopolistic competition. In the short run, Golden Chow sells 250 cans of dog food per day and makes _______. Other firms have _____ incentive to enter the industry.

an economic profit of $62.50 a day, an
no profit, no
an economic profit of $125.00 a day, an
normal profit of $125.00 a day, no

A monopolistic competitive market is _____________________.

efficient when all firms are making zero economic profit
efficient when all firms make zero normal profit
is inefficient because firms always make zero economic profit
inefficient because in the long run, price exceeds marginal cost

The figure shows the cost, marginal revenue, and demand curves of Golden Chow, a producer of dog food. The market for dog food is monopolistic competition. In the long run as new firms enter, Golden Chow cuts its output to 125 cans per day. Its excess capacity is _____________cans per day.

125
0
150
275

In a dominant-firm oligopoly, ______________ the quantity which makes marginal revenue equal to marginal cost, and _________ the remaining quantity demanded.

smaller firms produce; the dominant firm produces
the monopoly firm produces; the monopolistic competitive firms produce
the monopolistic competitive firm produces; the smaller firms produce
the dominant firm produces; the smaller firms produce

In the long run in a dominant-firm oligopoly, the dominant firm _____________________.

always earns zero economic profit
earns less economic profit than do the smaller firms
has a ratio of marginal cost to price that is greater than 1
has a ratio of price to marginal cost that is greater than 1

Game theory is most useful for determining the outcome when ___________________.

prison terms are involved
monopolistic competition exists
the market is dominated by a monopoly
the market structure is oligopoly

When two firms collude to maximize profit the total quantity produced by both firms is determined at the quantity where _________________.

industry marginal cost equals industry marginal revenue
excess capacity is minimized
excess capacity is zero
the firm's marginal cost equals the industry's marginal revenue

Oscar and Felix are the only firms that clean offices in a small town. They agree to operate as a cartel. The table gives the economic profits that each firm can make. If Felix cheats on the agreement but Oscar complies, Felix makes an economic profit of _______ and Oscar makes an economic profit of _______.

$7 million; $3 million
$6 million; $6 million
$4 million; $4 million
$3 million; $7 million

Oscar and Felix are the only firms that clean offices in a small town. They agree to operate as a cartel. The payoff matrix shows the economic profit that each firm can make. If the game is played only once, then __________________.

Felix and Oscar will each make $4 million profit
Felix will comply and Oscar will make $7 million profit
Felix will cheat and Oscar will make $3 million profit
Felix and Oscar will each make $6 million profit

Oscar and Felix are the only firms that clean offices in a small town. They agree to operate as a cartel. The payoff matrix shows the economic profit that each firm can make. If the game is played repeatedly and Felix and Oscar both use a tit-for-tat strategy, then ___________________.

Felix and Oscar will each make $6 million profit
Felix will make $3 million and Oscar will cheat
Felix will make $7 million and Oscar will comply
Felix and Oscar will each make $4 million profit

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