Introduction to Microeconomics (11)

Which of the following is not true?

• Oligopoly market has a small number of firms competing, usually a few to several.
• Oligopoly market has natural or legal barriers preventing the entry of new firms.
• In oligopoly market, the sales of one firm will not have a significant effect on the other firm.
• Duopoly is a market structure of two firms competing behind a barrier to entry.

Consider the cartel of Trick and Gear. The game is repeated indefinitely and each firm employs atit-for- tat strategy. The equilibrium is that:

• Both firms cheat on the agreement and it is called Nash equilibrium.
• Both firms comply with the agreement and it is called Co-operative equilibrium.
• Gear cheats and Trick complies with the agreement.
• Trick cheats and Gear complies with the agreement.

An example of a monopolistically competitive industry is

• phone service.
• the restaurant industry.
• wheat farming.
•  the automobile industry.

A characteristic of monopolistic competition is that each firm

• faces perfectly elastic demand.
• faces a downward-sloping demand curve.
• has a perfectly inelastic supply.
• has a perfectly elastic supply.

When firms in monopolistic competition incur an economic loss, some firms will

• enter the industry, and demand will become more elastic for the original firms.
• exit the industry, and demand will decrease for the firms that remain.
• enter the industry and produce more products.
•  exit the industry, and demand will increase for the firms that remain.

If firms in a monopolistically competitive industry are earning an economic profit, then

•  some workers will leave the industry's labor force.
• new firms will enter the industry.
• some firms will leave the industry.
• some customers will exit the market.