ECON 101 Chapter 11 Exam Questions with Verified Answers (Rated A+)
What do you think would happen in a commercial neighborhood near your home if a restaurant in that neighborhood were making a great deal of profit (select all that apply)?
a. In-and-Out burger will open a new franchise
b. Domi...
What do you think would happen in a commercial neighborhood near your home if a restaurant in that
neighborhood were making a great deal of profit (select all that apply)?
a. In-and-Out burger will open a new franchise
b. Domino's Pizza will move to this neighborhood from a rundown area of the town
c. Chipotle will open a new store next door
d. The restaurant will close down - Answers a. AND b. AND c.
All three new restaurants will enter the market if they saw the large profit margin.
Suppose that the graph below represents the cost function for the entire industry and that the demand
curve and marginal revenue curve represent the entire market. If the oligopoly acted as a single decision
maker, what quantity would it choose to maximize industry profit? - Answers At a level of output of "a",
the firms would face a marginal revenue greater than the marginal cost. They can increase profits by
increasing output. At output "c", the firms face a marginal cost greater than marginal revenue. (In fact,
marginal revenue is negative at that level of output.) Thus, the firms should cut back if they are
producing that much. The conclusion is that a small group of firms that is able to coordinate prices and
quantities should charge the same price and produce the same quantity that a monopoly would.
Complete the "Price = marginal cost" column by matching the market structure to the correct response.
Complete the "Economic profits in the long run" column by matching the market structure to the correct
response. Assume that oligopolies are successful in cooperating with one another.
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