6) In the above figure of a monopolistically competitive firm, the area of economic profit is A) ADB. B) ABC. C) P 2 FEP 5. D) P 2 AD P 4.

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1 1 1) The maximum total economic profit that can be made by colluding duopolists A) equals the economic profit made by a monopolist. B) exceeds the economic profit made by a monopolist. C) is less than the economic profit made by a monopolist. D) bears no necessary relation to the economic profit made by a monopolist. 2) When firms in monopolistic competition incur an economic loss, some firms will A) exit the industry, and demand will increase for the firms that remain. B) enter the industry and produce more products. C) enter the industry, and demand will become more elastic for the original firms. D) exit the industry, and demand will decrease for the firms that remain. 3) The prisoners' dilemma describes a single-play game that features A) an outcome in which the participants collude. B) a situation in which one player has better odds than the other. C) a large number of rivals cooperating with each other. D) two players who are unable to communicate with each other. 4) In the long run, a firm in a monopolistically competitive industry produces where its marginal cost A) exceeds its average cost. B) equals its price. C) is less than its average cost. D) equals its average cost. 5) Price wars are A) most likely when there is a monopoly. B) most likely when there is oligopoly. C) most likely when there is perfect competition. D) equally likely in the cases of monopoly, oligopoly, and perfect competition.

2 2 6) In the above figure of a monopolistically competitive firm, the area of economic profit is A) ADB. B) ABC. C) P 2 FEP 5. D) P 2 AD P 4. 7) In the above figure of a monopolistically competitive firm, the marginal cost of the last unit produced is A) equal to P 1 and is greater than marginal revenue. B) equal to P 2 and is greater than marginal revenue. C) equal to P 3 and is greater than marginal revenue. D) equal to P 1 and is equal to marginal revenue.

3 3 8) The table above displays the possible outcomes for Bob and Joe, who have been arrested for armed robbery. Which of the following is true? A) If Joe confesses, Bob should not confess. B) If Bob confesses, Joe should confess. C) The Nash equilibrium is that Joe and Bob both serve 2 years. D) If Joe does not confess, Bob should not confess. 9) In the figure above, if the firm's marginal cost is MC0, then the firm will produce A) less than 30 units per day. B) more than 30 but less than 40 units per day. C) 40 units per day. D) 30 units per day.

4 10) In long-run equilibrium, a firm's price definitely equals its average total cost in both A) perfect competition and monopolistic competition. B) oligopoly and monopoly. C) oligopoly and monopolistic competition. D) perfect competition and monopoly. 4 Price (pounds) Supply of each small firm (cases) Market demand (cases) ) The table above outlines the market demand and small firm supply in the situation of a dominant firm oligopoly. If there are ten identical small firms, then when the price is 30 per case, the quantity demanded from the dominant firm at this price is A) 0 cases. B) 540 cases. C) 600 cases. D) 60 cases.

5 5 12) If the natural monopoly shown in the figure above is unregulated, then the deadweight loss will be A) 0. B) 4 million. C) 8 million. D) 2 million. 13) If marginal cost pricing is imposed on the natural monopoly shown in the figure above, then it produces A) 3 million units. B) 4 million units. C) 5 million units. D) 2 million units. 14) If average cost pricing is imposed on the natural monopoly shown in the figure above, then the price is A) 2. B) 4. C) 6. D) 5. 15) Rate of return regulation is typically imposed on A) monopolistically competitive firms. B) perfectly competitive firms. C) a natural monopoly. D) an oligopoly.

6 6 Quantity (millions of vaccinations) Marginal private benefit (pounds) Marginal external benefit (pounds) ) Vaccinations provide both private benefits and external benefits. The table above provides information on the marginal private benefit and marginal external benefit associated with vaccination against varicella (chicken pox). If the marginal cost of a varicella vaccination is 10, then the efficient quantity of vaccinations is A) 3 million vaccinations. B) 5 million vaccinations. C) 6 million vaccinations. D) 4 million vaccinations. 17) A cost or benefit that arises from production (or consumption) and falls on someone other than the producer (or consumer) is called A) a property right. B) public provision. C) a deadweight loss. D) an externality. 18) The difference between marginal social cost and marginal private cost equals A) marginal external cost. B) marginal private benefit. C) marginal external benefit. D) the cost of producing an additional unit of a good.

7 7 19) In the above figure, in order to promote an efficient allocation of resources, the government could grant a subsidy equal to A) 5 per unit. B) 10 per unit. C) 15 per unit. D) zero.

8 8 20) In the figure above, if an excise tax is imposed that generates an efficient allocation of resources, then the amount of output will be A) zero. B) 150 units. C) 250 units. D) 50 units.