Question

37) One of the reasons cartels are considered unstable is that A) it is inefficient to manage individual firms collectively. B) member firms reduce their investment, thereby becoming uncompetitive over time. consumers seek out substitutes to the cartel product. D) there are wide fluctuations in price as cartel members vary their output. E) individual members of the cartel have an incentive to violate the cartel agreement 38) If there are economic profits in a monopolistically competitive industry, they will generally be competed away through the A) manipulation of the demand curve. B) increasing advertising budgets of existing firms. entry of new firms. D) introduction of brand name products by existing firms. E) exit of existing firms. 39) Monopolistic competition is similar to perfect competition in that A) firms in both types of market structures produce a standardized product. B) each firm faces a horizontal demand curve. firms in both types of market structure engage in non-price competition D) strategic behaviour is common to both market structures. E) neither has significant barriers to entry. The diagram below shows selected cost and revenue chroes for a firm in a monopolistically competitive industry. MC Price/Cost per Unit D-AR 20 40 60 80 100 120 140 10 180 Quantity MR FIGURE 11-1 40) Refer to Figure 11-1. What price will this profit-maximizing firm set? A) $25 B) $5 $10 D) $15 E) $20

Answer 1

a) "E"

individual members in the market have an incentive to violate the agreement to benefit themselves.

b) "C"

entry of the new firms will happen when there is a profit in the market.

c) "E"

none of the market have any significant barriers to entry in the market.

d) "E"

they will set a price of $20.