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Chapter_10_Monopolistic_Competition_and_Oligopoly
1
Firms may easily enter a monopolistically competitive market.
True
False
2
Product differentiation helps determine the slope of the demand curve
facing a firm in monopolistic competition.
True
False
3
Monopolistic competitors are protected by barriers to entry.
True
False
4
The forces that determine the cost of production are largely independent of
the forces that shape demand.
True
False
5
The term monopolistic competition
is an alternate expression for monopoly

is used to describe perfect competition with strong
entry barriers
denotes an industry with one seller of many
differentiated products
denotes an industry with many sellers of
homogeneous products
denotes an industry with many sellers of
6
Monopolistically competitive industries consist of
one firm selling several products

one firm selling one product
many firms, all selling identical products
many firms, each selling a slightly different product
many firms, each selling a completely different

product
7
Collusion among firms to raise price is rare in monopolistically competitive
markets because
there are too many firms

there are too few firms
there is only one firm
products are homogeneous
price leadership is used instead
8
Monopolistically competitive firms ignore the effect of their decisions upon
other firms in the industry because
each firm is large relative to the market

each firm is small relative to the market
there are few sellers in the market
there is only one seller in the market
all firms follow the same known pricing rules
9
Monopolistic competition is different from perfect competition because
monopolistic competitors produce
a homogeneous product
a homogeneous but unique product
identical products
products similar to those produced by a monopoly
10
If Family Travel Agency, a monopolistic competitor, offers services that
are differentiated from the services of other producers in the industry, it
faces a perfectly elastic demand curve

is a price taker
has some power to control the price it charges
faces a perfectly inelastic demand curve
produces a product with no close substitutes
11
A monopolistically competitive firm can raise price somewhat due to
product differentiation
barriers to entry
product similarity
its homogeneous product
high tariffs
12
The demand curve facing Imelda's Shoe Boutique, a monopolistically
competitive firm,
is horizontal because Imelda's is small relative to

the market as a whole
is horizontal because Imelda's is large relative to the
market as a whole
slopes downward because Imelda's is small relative
to the market as a whole
slopes downward because Imelda's sells a
differentiated product
slopes downward because Imelda's firm is the entire
industry
13
Monopolistically competitive firms use product differentiation to increase
the price elasticity of demand.
True
False
14
Monopolistic competition is best described as
many firms with some control over price, and some

many firms with no control over price, producing
identical products
a few firms with some control over price, producing
highly differentiated products
a few firms with no control over price, producing
similar products
a single firm producing all of the output for the
industry, with strong control over price
15
If a monopolistically competitive firm raises its price, it
loses all of its customers (sales drop to zero)

loses some, but not all, of its customers
loses very few customers
loses no customers at all
gains customers (sales increase)
16
Which of the following is most likely produced in a monopolistically
competitive market?
soybeans
autos
fast food
oil
local phone service
17
Which of the following is most likely produced in a monopolistically
competitive market?
restaurant meals
computer chips
firewood
motorcycles
soft drink
18
A firm could differentiate its product by all of the following means except
one. Which is the exception?
making the product available at a number of

different locations
increasing the number of services that accompany
the product
making the product physically different from other
products
using packaging or advertising to create a special
subjective image of the product in the consumer's mind
emphasizing that the product provides the same

benefits to consumers as the others on the market,
even when it is really physically different
19
All of the following are examples of product differentiation except one.
Which is the exception?
developing a new video game or a computer

program called "How to Teach Your New Dog Old
Tricks"
manufacturing a car that minimizes outside noise
relative to other cars
lowering the price of a good in a special sale
providing movies and special meals on airline flights
making sodiumfree, caffeinefree colas
20
Economic analysis of product differentiation leads to all of the following
conclusions except one. Which is the exception?
Product differentiation makes it harder for firms to

collude.
Product differentiation makes price leadership
harder to maintain.
Product differentiation sometimes contributes to
wasteful allocation of resources.
Product differentiation must be based on real,
substantive differences among products.
There is a tradeoff between using resources
efficiently and providing consumers with wide choices.
21
When firms differentiate their products, they
provide information to consumers with no additional

use of productive resources
always increase their profits
always create real differences among products
frequently create artificial or superficial differences
among products, thus raising production costs
usually strain the physical capacity of their plants
22
When firms in an industry produce differentiated products,
longrun economic profit will always be zero

shortrun economic profit will always be positive
the demand curves facing firms will always be
perfectly elastic
the demand curves facing firms will always be
downwardsloping
new firms will always have an incentive to enter the
industry in the long run
23
Monopolistic competitors are
price takers
price searchers
price maximizers
price ignorers
collusive price fixers
24
In economics, products are considered "differentiated" only if
they are physically or chemically different

sellers decide that they are different
buyers think that they are different
the government determines that they are different
they are produced by different firms
25
Compared to regular grocery stores, convenience stores have
higher prices and a more limited selection of goods
higher prices and a greater selection of goods
lower prices and a more limited selection of goods
lower prices and a greater selection of goods
equal prices and an equal selection of goods
26
A monopolistically competitive firm produces where demand is inelastic.
True
False
27
Firms in monopoly or monopolistically competitive market structures do not
have traditional supply curves as firms in perfect competition do.
True
False
28
A monopolistic competitor's demand curve is
perfectly elastic
less elastic than a monopolist's or oligopolist's but
more elastic than a perfect competitor's
as elastic as an oligopolist's
more elastic than a monopolist's or oligopolist's but
less elastic than a perfect competitor's
perfectly inelastic
29
The demand curve facing a firm will be more elastic,
the fewer the number of competing firms

the more differentiated the product
the more substitutes there are for its product
the greater the firm's ability to control price
the larger the profit the firm can make
30
What do monopolistic competition, pure monopoly, and perfect competition
have in common?
free entry
longrun economic profits
differentiated product
price taking
the rule of profit maximization
31 Exhibit 101
In Exhibit 101, the monopolistic competitor's profitmaximizing level of

output is
75 units
100 units
125 units
150 units
137.5 units
32
Exhibit 101
In Exhibit 101, the price that the monopolistic competitor will charge at the
profitmaximizing level of output is
$2
$4
$8
$9
$10
33
Exhibit 101
The monopolistic competitor in Exhibit 101 is in
longrun equilibrium because price equals average

total cost
longrun equilibrium because marginal cost equals
marginal revenue
longrun equilibrium because price exceeds marginal
cost
shortrun equilibrium because it is earning a positive
economic profit
shortrun equilibrium because price equals average
total cost
34
Exhibit 101
In Exhibit 101, the monopolistic competitor's total economic profit at the

profitmaximizing level of output is
$0
$4
$600
$6
$750
35
Exhibit 102
Consider Exhibit 102. If the firm is charging price P* for output q*, then in
order to minimize loss in the short run, the firm should
shut down because price is greater than average

variable cost
shut down because price is greater than marginal
cost
shut down because price is less than average
variable cost
continue to produce because price is greater than
average variable cost
continue to produce because price is greater than
marginal cost
36
Exhibit 103
Q P TC
1 $27 $10
2 24 17
3 21 25
4 18 40
5 15 60
The profitmaximizing output for the firm in Exhibit 103 is
0 units
1 unit
3 units
5 units
impossible to determine because MC and MR are not
known
37
Exhibit 103
Q P TC
1 $27 $10
2 24 17
3 21 25
4 18 40
5 15 60
The profitmaximizing price for the firm in Exhibit 103 is
$0
$27
$21
$15
impossible to determine because MR and MC are not
known
38
Exhibit 103
Q P TC
1 $27 $10
2 24 17
3 21 25
4 18 40
5 15 60
At the profitmaximizing output, the firm in Exhibit 103 is earning
an economic profit of $38

an economic profit, but the amount cannot be
determined
zero economic profit
an economic profit of $32
an economic loss
39
Exhibit 103
Q P TC
1 $27 $10
2 24 17
3 21 25
4 18 40
5 15 60
At the profitmaximizing output, the monopolistically competitive firm in

Exhibit 103 is in
longrun equilibrium because price equals average

total cost
longrun equilibrium because price is less than
average total cost
shortrun equilibrium because price is greater than
average total cost
shortrun equilibrium because there is an economic
loss
shortrun equilibrium because there is zero
economic profit
40 In the short run, a monopolistically competitive firm is
guaranteed to earn zero economic profit

guaranteed to earn economic profit
guaranteed to earn an economic loss
guaranteed to earn either zero or positive economic
profit
not guaranteed any level of economic profit
41
Exhibit 104
In the short run, which of the following should the firm in Exhibit 104 do?
Produce 10 units at a price of $36 per unit.

We cannot determine what the firm should do
without knowing its average variable cost.
42
Exhibit 104
For the situation depicted in Exhibit 104, what will happen in the longrun?
New technology will lower average total costs and
increase profits for the firm.
Firms will exit this market causing economic profit
to increase.
Product differentiation will lead to an increase in
profitablility.
New firms will enter the market driving economic
profit to zero.
Nothing, the situation will remain the same.
43
Exhibit 105
In the short run, the firm in Exhibit 105 should
shut down
produce 8 units at a price of $11 per unit
44
Exhibit 105
In the long run, the firm in Exhibit 105 can expect

to shut down
entry into the industry which will reduce the
demand for their product and lower their profit
exit from the industry which will increase demand
for their product and increase their profitability
competitors to differentiate their products which will
reduce the demand for their product and lower their
profit
no change in the industry
45
Exhibit 106
P Q TC
$7 0 $10
6 4 20
5 8 32
4 12 48
3 16 66
In Exhibit 106, what is the profitmaximizing price for this monopolistic

competitor in the short run?
$7
$6
$5
$4
$3
46
Exhibit 106
P Q TC
$7 0 $10
6 4 20
5 8 32
4 12 48
3 16 66
In Exhibit 106, what is the maximum profit this monopolistic competitor

can earn in the short run?
$40
$4
$48
$8
$0
47
If a monopolistically competitive firm can earn a profit, it will adjust
production until
MR > AVC
MR = ATC
MC > MR
MR = AR
MR = MC
48
Exhibit 107
Assume that the firm in Exhibit 107 is maximizing profit. Its total revenue
is
$5,320
$5,700
$4,750
$8,120
$8,100
49
Exhibit 107
At the profitmaximizing output level, total cost for the firm in Exhibit 107
is approximately
$5,700
$5,320
$4,750
$4,940
$8,100
50
Exhibit 107
At the profitmaximizing output level, the firm in Exhibit 107 is

earning economic profit of $760
earning zero economic profit
suffering a loss of $1,000
51
Exhibit 107
In the long run, the firm in Exhibit 107 can expect
to earn an economic profit of $760

earn an economic profit of $950
earn zero economic profit
earn an economic profit of $990
suffer a loss of $1,000
52
Assume a monopolistically competitive firm is earning an economic profit.
The marginal revenue from selling an additional unit is $30 and the marginal
cost of producing that additional unit is $23. The firm should
change neither its price nor its output level

reduce its price and increase its output level
increase its price and reduce its output level
reduce both its price and its output level
increase both its price and its output level
53
A rise in demand for restaurant meals is likely to cause which of the
following in the short run?
economic losses for each restaurant

a lower price for each restaurant meal
fewer restaurants in the industry
more restaurants in the industry
economic profit for restaurants
54
A rise in demand for restaurant meals is likely to cause which of the
following in the long run?
economic losses for each restaurant

a lower price for each restaurant meal
fewer restaurants in the industry
more restaurants in the industry
economic profit for restaurants
55
In both monopolistic competition and nonpricediscriminating monopoly,
the marginal revenue curve lies above the average

revenue curve
the marginal revenue curve lies above the demand
curve
the marginal revenue curve lies below the demand
curve
marginal revenue is equal to average revenue
marginal revenue is equal to price
56
A monopolistically competitive firm is producing an output level at which
marginal revenue is greater than marginal cost. This firm should
__________ quantity and __________ price to increase profit or reduce
losses.
increase, increase
increase; decrease
decrease; increase
decrease; decrease
increase; not change
57
A monopolistically competitive firm is producing an output level at which
marginal revenue is less than marginal cost. This firm should __________
quantity and __________ price to increase profit or reduce losses.
increase, increase
increase; decrease
decrease; increase
decrease; decrease
increase; not change
58
Exhibit 108
Assume the firm in Exhibit 108 is currently charging price P and producing
output level Q. In order to maximize profit (or minimize loss), the firm
should
charge more and sell less

charge less and sell more
charge less and sell less
charge more and sell more
continue to charge P and sell Q
59
Exhibit 109
In order to maximize profit or minimize loss, the firm in Exhibit 109 should
produce 100 units of output and charge $15

produce 100 units of output and charge $8
produce more than 100 units of output and charge
less than $8
produce slightly less than 100 units of output and
charge more than $8
shut down
60
Exhibit 109
If the firm in Exhibit 109 produces 100 units of output, it will have
both d and e
variable cost of slightly less than $800
fixed cost of slightly more than $700
total cost of $1,500
total revenue of $800
61
Which of the following describes the relationship among market price (P),
average revenue (AR), and marginal revenue (MR) for a firm in
monopolistic competition.
P = AR = MR
P > AR = MR
P = AR > MR
P > AR > MR
P = AR < MR
62
A profitmaximizing firm in monopolistic competition should shut down in
the short run
if marginal revenue is less than price

if price is always less than average total cost
if price is always less than average fixed cost
if price is always less than average variable cost
under no circumstances
63
In the long run in monopolistic competition, firms earn zero economic profit.
True
False
64
If a monopolistically competitive firm is in longrun equilibrium and average
cost equals $150, then the market price must be $150.
True
False
65
Monopolistic competition is similar to
perfect competition because the firms face

downwardsloping demand curves and can earn only a
normal profit in the long run
pure monopoly because the firms face downward
sloping demand curves and can earn only a normal
profit in the long run
perfect competition because the firms face
downwardsloping demand curves and similar to pure
monopoly in that the firms can earn only a normal
sloping demand curves and similar to perfect
competition in that the firms can earn only a normal
sloping demand curves and can earn an economic profit
in the long run
66
In the long run, a monopolistically competitive firm will
produce a greater variety of goods than do firms in

other market structures
produce a greater output level than would a
perfectly competitive firm
produce where price equals average total cost
earn an economic profit
suffer a loss because of its advertising budget
67
Suppose that a monopolistically competitive firm is in longrun equilibrium.
The firm's demand curve is tangent to its average cost curve at Q = 25.
Average cost is minimized at Q = 35, where average cost is $50. Which of
the following is true?
This firm maximizes profit at an output level of 25

units.
This firm maximizes profit at an output level of 35
units.
This firm maximizes profit at an output level less
than 25 units.
This firm maximizes profit at an output level greater
than 35 units.
There is not enough information to find the firm's
profitmaximizing level of output.
68
Suppose that a monopolistically competitive firm is in longrun equilibrium.
The firm's demand curve is tangent to its average cost curve at Q = 25.
Average cost is minimized at Q = 35, where average cost is $50. Which of
the following is true?
This firm charges $50 for the good.

This firm charges more than $50 for the good.
This firm charges less than $50 for the good.
The firm has excess capacity at all output levels
greater than 35 units.
Average cost is $50 at the profitmaximizing output
level.
69
Because of easy entry, monopolistically competitive firms will
produce at the lowest average total cost

charge a price equal to marginal cost
earn no economic profit in the long run
take advantage of all economies of scale
earn no economic profit in the short run
70
Exhibit 1010
P Q TC
$7 0 $10
6 4 20
5 8 32
4 12 48
3 16 66
In Exhibit 1010, what is the maximum profit this monopolistic competitor

can earn in the long run?
$40
$4
$48
$8
$0
71
Exhibit 1011
Assume that the firm in Exhibit 1011 maximizes profit. Its total revenue is
$5,200
$4,000
$3,600
$5,600
$3,200
72
Exhibit 1011
At the profitmaximizing output level, total cost for the firm in Exhibit 1011
is
$5,200
$4,000
$3,600
$5,600
impossible to determine
73
Exhibit 1011
At the profitmaximizing output level, the firm in Exhibit 1011 is

earning zero economic profit
suffering a loss of $200
suffering a loss of $400
74
A firm will only earn normal profit in the long run
if firms can freely enter or leave the market

if firms do not try to maximize profit
only if the industry is perfectly competitive
whenever products are not differentiated
if barriers to entry exist
75
In the long run, Bubba's Baby Boutique, a monopolistically competitive
firm,
earns zero normal profit but positive economic profit
earns normal profit but zero economic profit

earns normal and economic profit
earns zero normal and economic profit
might earn any level of economic profit; no level is
guaranteed
76
In the long run, the economic profit of Hoot's Pump Chicken 'n' Ribs, a
monopolistic competitor,
is not eliminated because competition is not perfect
is not eliminated because the demand curve slopes

downward
is eliminated because of new firms entering the
industry
is eliminated because of firms leaving the industry
is not eliminated because new firms cannot enter
the industry
77
A permanent decrease in demand for convenience store services is likely to
cause which of the following in the long run?
an economic loss for each firm

a higher price for each firm's output
fewer firms in the industry
more firms in the industry
economic profit for each firm
78
If the firms in a monopolistically competitive industry are suffering short
run losses, which of the following will occur in the long run?
Some firms will enter the industry.

Customers of firms that leave the industry will
switch to remaining firms.
Firms that remain in the industry will face reduced
demand.
Firms will continue to incur losses.
There will be no excess capacity.
79
If the firms in a monopolistically competitive industry are earning shortrun
profit, which of the following is not likely to occur in the long run?
New firms will enter the industry.

New firms in the industry will draw customers away
from existing firms.
Existing firms in the industry will face a decrease in
demand.
Firms will continue to earn profit.
Firms will produce with some excess capacity.
80
In the long run in monopolistic competition, the demand curve facing the
typical firm
is perfectly elastic
slopes upward
is tangent to the firm's average total cost curve
lies above the firm's average total cost curve
is the same as the portion of the firm's marginal
cost curve above average variable cost
81
As new monopolistically competitive firms enter the market, the demand
facing each firm __________, causing the price charged by each firm to
__________. In the long run, each firm will earn a __________ profit.
falls; rise; positive

rises; fall; positive
falls; rise; normal
rises; fall; normal
falls; fall; normal
82
If the demand curve facing the Acme Awl Company is tangent to its
average total cost curve, all of the following statements are true except one.
Which is the exception?
Economic profit is zero.

A normal profit exists.
Marginal cost must exceed marginal revenue.
Acme has excess capacity.
Firms have no incentive to enter or leave this
industry.
83
In the long run in monopolistic competition, a firm will not produce the
output level that minimizes average cost because
that output level is less than the profitmaximizing

one
at that output level, MC is greater than MR
at that output level, P is greater than MR
demand is horizontal
that would leave the firm with excess capacity
84
Which of the following characteristics does perfect competition share with
monopolistic competition?
pricetaking firms
zero longrun economic profit
homogeneous product
some barriers to entry
economies of scale in production
85
Monopolistically competitive firms
are guaranteed to earn shortrun economic profit

may earn shortrun economic profits, although long
run economic profit is typically zero
may earn economic profit both in the short run and
in the long run
earn zero economic profit both in the short run and
in the long run
can only earn an economic profit in the inelastic
portion of their demand curves
86
In the long run, economic profit for a monopolistically competitive firm
is zero, due to the lack of barriers to entry

is zero, due to product differentiation
may be positive, due to strong barriers to entry
may be positive, due to product differentiation
may be positive, due to advertising and product
promotion
87
Exhibit 1012
The profitmaximizing (or lossminimizing) output for the firm in Exhibit 10
12 is
zero (i.e., a shut down case)

700 units
1,000 units
more than 700 and less than 1,000 units
more than 1,000 units
88
Exhibit 1012
The profitmaximizing (or lossminimizing) price the firm would charge in
Exhibit 1012 is
nonexistent, since the firm should shut down

$3.25
$3.00
$2.50
between $2.50 and $3.00
89
Exhibit 1012
At the profitmaximizing (or lossminimizing) output and price, the firm in

Exhibit 1012 would
be earning zero economic profit (i.e., breaking

even)
be earning an economic profit
be earning an economic loss
be better off to shut down since total revenue does
not cover fixed costs
have to expand to stay in business in the long run
90
In the long run, a monopolistically competitive firm will find
its demand curve shifting until price equals average

total cost
its cost curve shifting until price equals average
total cost
its demand curve shifting until marginal revenue
equals marginal cost
its cost curve shifting until marginal revenue equals
marginal cost
no changes in its demand or cost curves if it is
earning an economic profit
91
Suppose that firms in a monopolistically competitive industry are earning
shortrun economic profits. In the long run, the demand curve facing each
individual firm can be expected to
shift to the left and become flatter

shift to the left and become steeper
shift to the right and become flatter
shift to the right and become steeper
remain constant
92
In the shortrun, firms in a monopolistically competitive market will earn
zero economic profit.
True
False
93
The video rental market can be described as a monopolistically competitive
market. As a result of the economic profit earned by the first video rental
outlets,
existing firms were able to successfully lobby the

government for patent protection
competitors were attracted to the industry, and their
entry reduced economic profit
demand dried up
Blockbuster saw an opportunity to take over the
industry
competitors were discouraged from entering the
industry
94 In the longrun, firms in a monopolistically competitive market earn zero
economic profit.
True
False
95
In the longrun, both perfectly competitive and monopolistically competitive
firms will produce at minimum average cost.
True
False
96
In the long run in monopolistic competition, all economies of scale are
exhausted.
True
False
97
Excess capacity is defined as the difference between a firm's maximum
possible output and its actual output.
True
False
98
Which of the following is inconsistent with the model of perfect
competition?
ease of entry into an industry

ease of exit from an industry
many buyers and sellers in the industry
advertising of product differences in the industry
a horizontal demand curve facing each firm in the
industry
99
In which of the following market structures is a firm most likely to advertise
extensively and fear entry of new firms?
perfect competition
pure monopoly
monopolistic competition
oligopoly
both perfect competition and monopolistic
competition
100 Which of the following is true of the relationship between price and
marginal cost under monopolistic competition?
P = MC at all levels of output

P = MC only at the profitmaximizing quantity
P > MC at the profitmaximizing quantity
P < MC at the profitmaximizing quantity
P < MC at the quantities below the profit
maximizing quantity
101
In longrun equilibrium, a monopolistically competitive firm will produce
at the minimum average cost

at full capacity
along the downwardsloping portion of its ATC
curve
along the upwardsloping portion of its ATC curve
at the minimum of marginal cost
102
At the profitmaximizing output, price is greater than marginal cost
for a monopolistically competitive firm only in the

short run
for a monopolistically competitive firm only in the
long run
for a monopolistically competitive firm in both the
short run and the long run
for a perfectly competitive firm only in the short
run
for a perfectly competitive firm only in the long run
103
In the long run, the output of a monopolistically competitive firm
exceeds that of an otherwise similar perfectly

competitive firm
is less than that of an otherwise similar perfectly
competitive firm
is at the point at which LRAC is minimized
equals that of an otherwise similar perfectly
competitive firm
is less than that of an otherwise similar monopolist
104
A monopolistically competitive firm
earns no longrun economic profit and is therefore

allocatively efficient
earns no longrun economic profit and therefore
produces at the minimum point of its ATC curve
earns no longrun economic profit and is
allocatively efficient even though it is not producing at
the minimum point of its ATC curve
earns no longrun economic profit, is allocatively
inefficient, and does not produce at the minimum
point of its ATC curve
has a chance of making a longrun economic profit
and is therefore allocatively inefficient
105
Although both perfectly competitive and monopolistically competitive
firms earn normal profits in the long run, monopolistically competitive
firms will not
operate where price equals marginal cost

charge a higher price than firms in perfect
competition
produce a smaller quantity than firms in perfect
competition
produce where price equals average total cost
exit when demand falls below longrun average
costs
106
Which of the following is true of firms in both monopolistic competition
and perfect competition?
Firms face a horizontal demand curve.

Price exceeds marginal revenue.
Firms can enter and leave the industry with
relative ease.
Price exceeds marginal cost.
Products are differentiated.
107
One difference between perfect competition and monopolistic competition
is that
in perfect competition, firms cannot earn a long

run economic profit
in perfect competition, firms take full advantage of
economies of scale in longrun equilibrium; in
monopolistic competition, firms do not
only under perfect competition is there ease of
entry and exit
in monopolistic competition, the firm's demand
curve is horizontal; in perfect competition, the firm's
demand curve slopes downward
in perfect competition, there are many firms;
under monopolistic competition, there are few firms
108
Which of the following characteristics does perfect competition have in
common with monopolistic competition?
pricetaking firms
homogeneous products
no barriers to entry
horizontal demand curve
neither market advertises
109
Compared to a firm in perfect competition, the monopolistically
competitive firm tends to
produce less and charge a higher price

produce less and charge a lower price
produce more and charge a lower price
produce more and charge a higher price
produce the same quantity
110
Excess capacity typically occurs
in the short run in perfect competition

in the short run in monopolistic competition
in longrun equilibrium in perfect competition
in longrun equilibrium in monopolistic competition
usually in markets experiencing an increase in

demand
111
Which of the following is unique to perfect competition?
The individual firm cannot earn economic profit in

the long run.
It is easy for new firms to enter the industry.
The market demand curve slopes downward.
The demand curve facing an individual firm is
perfectly elastic.
The firms in the industry produce a homogeneous
product.
112
Monopolistically competitive firms do not achieve allocative efficiency in
the long run because
marginal cost equals marginal revenue

marginal cost is greater than marginal revenue
marginal cost is less than marginal revenue
price is less than marginal cost
price is greater than marginal cost
113
Monopolistically competitive firms do not achieve productive efficiency
because
entry of firms raises production costs in the long

run
barriers to entry allow profit to be earned in the
long run
price is greater than marginal cost at the profit
maximizing output level
profit is maximized at a quantity where average
total cost is not minimized
there is no threat of entry in the long run
114
Firms in monopolistic competition and perfect competition typically
are price takers

produce identical products
earn zero economic profit in the long run
face a downwardsloping demand curve
face an upwardsloping total revenue curve at all
rates of output
115
Monopolistic competition is similar to
perfect competition, in that firms face downward

sloping demand curves and earn zero longrun
economic profit
pure monopoly, in that firms face downward
sloping demand curves and can earn economic profits
both in the short run and in the long run
perfect competition, in that firms face perfectly
elastic demand curves and earn zero longrun
economic profit
pure monopoly, in that firms can earn economic
profits both in the short run and in the long run, and
similar to perfect competition, in that firms face
perfectly elastic demand curves
pure monopoly, in that firms face downward
sloping demand curves, and similar to perfect
competition, in that longrun economic profit is zero
116
If marginal revenue is less than price for a firm, it must be true that the
firm
is a monopoly
is in perfect competition
is in monopolistic competition
faces a perfectly elastic demand curve
faces a downwardsloping demand curve
117
Which of the following characteristics distinguishes oligopoly from other
market structures?
a horizontal demand curve

a downwardsloping demand curve
production of homogeneous outputs
production of differentiated outputs
interdependence among firms in the industry
118
Oligopolistic industries consist of
a few independent firms

a few interdependent firms
many interdependent firms
many independent firms
a small monopoly
119
The automobile, breakfast cereal, and tobacco industries are examples of
oligopoly
perfect competition
monopoly
monopsony
120
The defining characteristic of oligopoly is that each firm
produces the same output as its rivals

acts independently of its rivals
is mutually interdependent
is atomistic
advertises how its products are different from its
rivals' products
121
An intersection known as Four Corners lies 300 miles from the nearest
town. At this intersection are three independently owned gas stations and
one small pharmacy. Which of the following is true?
The firms are all perfectly competitive because of

their size.
It would be easier for all four firms to form a cartel
than for only the gas stations to do so.
The gas stations are monopolistically competitive
because there are so few of them that they are almost
monopolists.
The gas stations are perfectly competitive; the
pharmacy is not.
The gas stations are oligopolists; the pharmacy is a
monopolist.
122
Which of the following is unique to oligopoly among all the market
structures?
profit maximization
mutual interdependence
advertising
longrun economic profits
123
Oligopolists are more sensitive to the pricing and output policies of their
rivals when
all firms produce identical products

their products are highly differentiated
there is freedom of entry and exit
there are barriers to entry
there are many firms in the industry
124
The defining characteristic of oligopoly is product differentiation.
True
False
125
Something is called a barrier to entry only if it makes entry into an
industry absolutely impossible.
True
False
126
When there are barriers to entry, a profitmaximizing firm already in the
industry can charge any price it wants, even in the long run.
True
False
127
It is harder to explain the behavior of firms in oligopoly than in other
market structures because in oligopoly
the firms act independently of each other

firms base their decisions on what their rivals do
only differentiated products are produced
only homogeneous products are produced
the demand curve can slope upward
128
Which of the following is not considered a barrier to entry?
economies of scale
patents
control of a scarce resource
licensing
perfect price discrimination
129
For firms in an oligopoly to be interdependent,
goods must be undifferentiated

goods must be differentiated
firms must be small
barriers to entry must be minimal
goods can be either undifferentiated or
differentiated
130
An oligopoly is characterized by
few firms, which have control over market price

many firms and some barriers to entry
a large number of firms and no barriers to entry
a single firm and no barriers to entry
a single firm and significant barriers to entry
131
In which market structure(s) might firms produce an undifferentiated
product?
perfect competition only

perfect competition and oligopoly
monopolistic competition only
perfect competition and monopolistic competition
monopoly only
132
If Ford raises the price of its automobiles, the demand curve for GM
automobiles
shifts to the left

is unaffected
becomes more elastic
shifts to the right
becomes vertical
133
In an oligopoly, the demand curve facing an individual firm depends upon
the behavior of competing firms

the shape of the firm's average total cost curve
the shape of the firm's marginal cost curve
the firm's supply curve
the shape of the firm's average variable cost curve
134
Interdependent decision making on price, quality, or advertising is
characteristic of
perfect competition
monopolies
oligopolies
both oligopolies and monopolistic competition
135
There are multiple models of pricing behavior in oligopolistic markets
because
it is difficult to predict how rival firms will react to

any pricing decision
the demand curve slopes upward for these firms
firms could earn profit in the long run unlike other
markets
price has a direct impact on profit for a firm in
oligopoly
the products are not identical in terms of quality,
image, location
136
In oligopoly, minimum efficient scale is large relative to the market.
True
False
137
Economies of scale yield
declining average cost as output increases

declining marginal cost as output increases
declining total cost as output increases
diminishing average returns as output increases
increasing marginal revenue as output increases
138
Exhibit 1013
All of the following statements regarding Exhibit 1013 are true except
one. Which is the exception?
The firm represented in the exhibit will likely be a

perfect competitor.
There are economies of scale in this industry.
The minimum efficient quantity is 1,000 units.
At 500 units there is excess capacity.
A firm too small to produce at least 1,000 units will
have difficulty surviving in this industry.
139
Exhibit 1013
Consider Exhibit 1013. If two firms each produced 500 units, the total
cost of supplying 1,000 units would be
$6
$4,000
$4
$3,000
$6,000
140 Exhibit 1014
Which of the curves shown in Exhibit 1014 best represents the longrun average
cost curve for an oligopolist?
Curve a
Curve b
Curve c
Curve d
Curve e
141
The automobile industry is
in monopolistic competition because brand names

are important
in monopolistic competition because it has
economies of scale
in monopolistic competition for legal reasons
an oligopoly because each firm must produce a
large amount of output before it can achieve low
average costs
an oligopoly for legal reasons
142
If a firm must produce a significant share of market output before low
average costs can be achieved, the structure of this industry will tend to be
perfect competition
oligopoly
either monopolistic competition or oligopoly
either perfect competition or monopolistic
competition
143
Which of the following is not an example of an oligopolistic barrier to
entry?
diseconomies of scale
legal restrictions
advertising and brand proliferation
high startup costs
control over an essential resource
144
Oligopolists often sacrifice economies of scale as they expand product
variety.
True
False
145
A brand name may contribute to oligopolists' economic profit by
shifting the demand curve leftward

shifting the supply curve leftward
overcoming economies of scale
acting as a barrier to entry
reducing advertising costs
146
The various models of oligopoly explain observed behavior in different
industries, but none is satisfactory as a general theory of oligopoly.
True
False
147
Which of the following is an example of an actual cartel?
the three largest cereal producers in the United

States
General Motors, Ford, and Chrysler
the Organization of Petroleum Exporting Countries
(OPEC)
the three major U.S. cigarette manufacturers
U.S. television networks ABC, NBC, CBS, and
Fox
148
Collusion is most likely to occur in those oligopolies in which firms have
vastly different cost structures.
True
False
149
Cartels are inherently unstable.
True
False
150
Collusion and cartels are frequently legal in Europe.
True
False
151
An oligopolist that cheats on a collusive agreement by reducing price will
quickly be forced out of the industry by its competitors.
True
False
152
The incentives for oligopolists to cheat on collusive agreements are
strongest during periods of increasing industry sales.
True
False
153
If a cartel can earn a profit, it will increase production as long as
MR > MC
MR > ATC
MC > MR
MR < AR
MR > AVC
154
Two heavy equipment manufacturers might collude in an effort to do all of
the following except one. Which is the exception?
determine a more advantageous price and quantity
prevent new entry into the market

take advantage of the legal benefits that U.S.
cartels receive
increase their combined profits
predict the behavior of other competitors in the
heavy equipment market with greater certainty
155
A cartel's marginal cost curve is the
highest of all the individual firms' marginal cost

curves
lowest of all the individual firms' marginal cost
lowest of all the individual firms' marginal cost
curves
horizontal sum of all the individual firms' marginal
cost curves
average of all the individual firms' marginal cost
curves
product of all the individual firms' marginal cost
curves
156
A cartel's profitmaximizing quantity occurs where the cartel's

marginal cost equals demand
price is highest
cost is lowest
demand curve has a kink
157
A cartel's profitmaximizing price is
on the demand curve at the quantity where

on the demand curve where it intersects its
marginal cost curve
the highest price possible
determined by using the costplus pricing model
where the kink in the demand curve occurs
158
Collusion occurs when
a firm chooses a level of output to maximize its

own profit
firms get together to maximize joint profits
firms refuse to follow their price leaders
firms petition their U.S. senators for favors
two firms' price and output decisions come into
conflict
159
A cartel is
a group of oligopolistic firms that engage in formal

collusion
a group of monopolistically competitive firms which
charge the same price
usually legal in the United States
an agreement among rival firms to set prices
independently
illegal throughout the world
160
Three firms that are successful in colluding to raise their prices must
lose profits
announce any price changes to the government
restrict output
increase advertising to earn a profit
expand production
161
In a cartel,
all firms produce the same amount of output and

earn the same profit
all firms produce the same amount of output but
earn different amounts of profit because their costs
differ
firms produce different amounts of output but earn
the same profit
firms with higher average cost produce more so
that all firms earn the same profit
firms with lower average cost often earn higher
profits
162
Under which of the following market conditions is it most difficult to
maintain a cartel agreement?
There are many firms in the industry and these

firms have similar costs.
firms have different costs.
There are few firms in the industry and these firms
have similar costs.
There are few firms in the industry and these firms
have different costs.
firms produce homogeneous products.
163
If all six suppliers of cement to Metropolis all agree to establishes a price
of $45 per ton, this would be
a legal contract
price discrimination
costplus pricing
a cartel
beneficial to consumers
164
The chances of successful collusion are greatest when
firms are producing a differentiated product

there are tiny firms and huge firms together in the
same industry
demand curves and cost curves are similar among
the firms in the industry
demand is falling
165
If zinc suppliers are successful in forming an international zinc cartel,
they will experience
lower output and higher prices, which discourage

the entry of new firms into the industry
lower output, higher prices, and the need to
organize an effort to prevent the entry of new firms
into the industry
higher output and higher prices, which discourage
the entry of new firms into the industry
higher output, higher prices, and the need to
organize an effort to prevent the entry of new firms
into the industry
none of the above
166
Which of the following helps to make a cartel successful?
stable demand and costs

differentiated output
highly variable cost conditions
highly variable demand conditions
rapidly changing technology
167
An oligopoly model that describes formal collusion is the
kinked demand curve model

cartel model
costplus pricing model
game theory model
horizontal merger model
168
A formal agreement among the firms in an industry to coordinate their
production and pricing decisions in order to earn monopoly profits is
known as
price discrimination
the kinked demand curve
a cartel
joint competition
169 Each member of a cartel
faces a temptation to cheat on the agreement

because lowering its price slightly below the
established price will usually increase the firm's sales
and profit
faces a temptation to cheat on the agreement
because raising its price slightly above the established
price will usually increase the firm's sales and profit
has no temptation to cheat on the agreement
established price will usually have no impact on the
firm's sales and profit
because raising its price slightly above the established
price will usually decrease the firm's sales and profit
established price will usually lower the firm's sales and
profit
170
A cartel is
explicit collusion
a conglomerate merger
a horizontal merger
legal in the United States
implicit collusion
171
Collusion is easier to achieve and maintain in oligopoly when

the firms' products are homogeneous
the firms' cost structures are very different
there are very weak barriers to entry
the industry is located in the United States
172
Suppose a firm that sells a variety of athletic shoes is trying to start a
pattern of price leadership in its market. Which of the following is not a
problem this firm might have to face?
Rivals recognize the intent of its actions.

Other firms may not necessarily follow the leader.
Other firms may not follow the leader but offer
better service instead.
Differentiation among products allows for more
variation in price.
The price leader must keep costs lower than other
firms'.
173
Tacit collusion occurs in industries that
are monopolistically competitive

contain price leaders
experience rapid technological change
are regulated
produce very differentiated products
174
Which of the following does not hinder successful price leadership?
all of the following are correct

potentially large economic profits due to this
activity
cheating by offering secret discounts
illegality of coordinated pricing
175
Historically, the U.S. steel industry has been a good example of
a cartel
a pure monopoly
the kinked demand curve model of oligopoly
the price leadership model of oligopoly
176
During certain periods in the past few decades, if one of the three major
breakfast cereal producers in the United States announced a price
increase, the other two announced a similar price increase. This is a good
example of
a cartel
a pure monopoly
the kinked demand curve model of oligopoly
the price leadership model of oligopoly
177
Costplus pricing
is used only in oligopolistic market structures

simplifies pricing policy by adding a markup to
average total cost
in actual practice leads to markups which are
greater for more elastic demand curves
is likely to increase profits more than the use of
marginal analysis
requires the firm to project the amount which will
be sold and then "markup" the price based on
average variable cost
178
Price wars occur more often in monopolistic competition than in other
market structures.
True
False
179
A payoff matrix is a table listing the expected economic profit resulting
from different possible strategies.
True
False
180
In the game theory model of oligopoly,
firms will be successful in colluding to raise prices

one firm raises its prices, and other firms follow
suit
firms will match other firms' price cuts but not their
price increases
firms may attempt to avoid the worst outcome but
may achieve a lessthanoptimal outcome
firms never avoid the worst outcome
181
In game theory, if two rivals in an oligopoly can avoid a large loss by
cutting price from $40 to $35,
neither will cut its price

one will charge $40 and the other will charge $35
their actions will depend on their respective
strategies
each will cut price but not all the way to $35
they will collude to do what's best for both of them
182
One common assumption in game theory is that firms
try to avoid the worst outcome

try to achieve the best outcome
minimize losses
always cooperate
always compete
183
Game theory is a separate model of oligopoly therefore it is of limited
value when trying to generally understand firm level behavior
True
False
184
Game theory provides us with a general approach to understanding the
behavior of firms when their choices are interdependent
True
False
185
The prisoner's dilemma is applicable only when considering the illegal
behavior that firms in a noncompetitive market may pursue
True
False
186
A player's strategy is a game plan when decisions are interdependent
True
False
187
Because firms in an oligopoly are interdependent, they attempt to
maximize revenues rather than profits
True
False
188
Game theory is most useful in understanding the decision making behavior
of firms in which type of industry?
perfect competition
monopoly
natural monopoly
oligopoly
189
Game theory focuses on
strategic behavior among interdependent firms

professional athletic events
competition between the players in board games
competition between those in the political arena
and those in the market place
the interaction between firms in a competitive
industry and those in a noncompetitive industry
190
Game theory is used in a number of areas in economics. What is the
primary reason that it is used in analyzing oligopoly type market
structures?
The firms are producing a similar product

The firms are producing differentiated products
The demand curve facing the oligopolistic firms is
perfectly inelastic
The mutual interdependence of firms in industries
with a small number of firms
The demand curve the oligopolistic firm faces is
downward sloping
191
Game theory is the study of which of the following?
The prisoner's dilemma

The behavior of people engaged in recreational
games
The mutual interdependence of firms in
oligopolistic industries
The downward sloping demand curve faced by
firms in an oligopoly
The interaction between marginal and average
revenue
192
The solution of a game is dependent upon
predicted response of competitors

the existence of a perfectly inelastic demand curve
costs of production being constant

economies of scale in production
marginal revenue being equal to marginal cost
193
Which of the following is likely to occur when it is known that a two
person game is to be played only once?
Collusion
The demand curve becomes perfectly inelastic for
this time period
The pursuit of profit maximization for the entire
industry
An attempt to equate marginal revenue with
marginal cost
194
A prisoner's dilemma is a situation in which
a change in marginal cost may not lead to a

change in price
a firm's competitors follow a price increase but
ignore a price decrease
oligopolists behave irrationally
oligopolists attempt to maximize sales rather than
profits
an oligopolists demand curve may become
perfectly inelastic
195
Which of the following is likely to occur when a twoperson game can be
played repeatedly?
Collusion and cooperation among the players

The industry demand curve will become perfectly
elastic
The industry demand curve will become perfectly
inelastic
There is no solution possible because of the
indeterminate price quantity combinations
196
A prisoner's dilemma can be described as a situation in which
a decision maker is uncertain about the potential

punishment for something done in the past
an individual decision maker finds it in his best
interest to pursue a course of action that can lead to a
less than desirable outcome for the group
producers act so as to avoid maximizing profits
because of government retaliation
individual firms seeks to maximize their own profits
with no regard for the group
the summation of individual demand curves
creates an inelastic demand curve facing the industry
197
The principal advantage of the game theory approach is that it allows us to
take all possible information into consideration

before developing a theory
better understand why the firm in a competitive
industry avoids games
better understand how the government should
regulate a natural monopoly
better understand decision making when one
person's choices affect another person's choices
understand the relationship between the firm and
the industry demand curves
198
The advantage of game theory is that it allows us to focus on the
individual firm's incentives to cooperate or not

relationship between the market and firm level
demand curve
costs and benefits
government regulators and the firms in an industry
models where there are no barriers to entry
199
The term strategy in terms of game theory refers to
the relationship between price and marginal cost

the relationship between individual firm demand
curves and the market demand curve
each firm's game plan in making decisions
the interrelationship between price and marginal
revenue
the tendency for collusive firms to generate normal
profits
200
The payoff matrix refers to
the difference between total revenue and total cost

at different price levels
a listing of the rewards and penalties associated
with pursuing various strategies
the difference between average and marginal cost
for the noncompetitive firm
the difference between average and marginal
revenue in a noncompetitive industry
the difference between average variable and
average total cost to the firm
201
The solution in the prisoner's dilemma is called the
loss minimizing solution

profit maximizing equilibrium
dominantstrategy equilibrium
revenue maximizing equilibrium
marginal revenue solution
202 The dominantstrategy solution implies that each firm
ignores the reactions of competitors

colludes with competitors to maximize industry
profits
ignores the decisions of the other firms
takes all potential bits of information into
consideration before making a decision
selects the optimal solution to a game
203
The prisoner's dilemma provides an explanation for
the price wars that sometimes occur in oligopolies

the ability of firms in an oligopoly to extract the
entire consumer surplus
the collusive behavior that sometimes occurs in an
oligopoly
the failure of firms in noncompetitive industries to
maximize profits
an irrational behavior that occurs in competitive
markets
204
The titfortat strategy implies that the firms
in noncompetitive industries match price increases

but ignore price decreases
will follow the lead of the dominant firm in making
pricing decisions
prices will change whenever fixed cost changes
cooperate on the first round, and then follow your
competitors reactions on the second round
price will only change if demand changes
205
Which oligopoly model was developed to explain price wars in an
industry?
natural oligopolies
cartels
price leadership by a dominant firm
game theory
costplus theory
206
In a game that can be repeated, the optimal solution is
dependent upon each firm's decision in the first

round of decision making
independent of the decisions that competitive firms
made on the first round
to maximize profits regardless of what competitors
do
to minimize costs regardless of what competitors
do
to select the solution that minimizes the potential
losses from a decision
207
Firms with market power offer a differentiated product in order to
follow the trends

increase market power
support its contractors in lowwage countries
fill up costly warehouses
All of the answers are correct.
208
When using game theory to analyze oligopoly, firms will always have a
dominant strategy.
True
False
209
Zara is the largest fashion retailer in Europe. Which of the following
would not a barrier to entry that protects Zara's market power?
two weeks to develop and deliver a new item, as

opposed to an industry average of nine months
10,000 new designs a year
stores can restock in a few days
little advertising
new fashions distributed twice a week, as opposed
to twice a season
210
A unique feature of oligopoly markets is
market power
mutual interdependence
barriers to entry
product heterogeneity
pricing power
211
A group of firms that agree to coordinate their production and pricing
decisions to reap monopoly profit is called an oligopoly.
True
False
212 As a real estate agent, Krista Otavi prides herself on her good training,
availability to clients, and hard work to make a sale. Which one of the
basic ways of product differentiation does Krista emphasize?
services
product image
location
commission rate
physical differences
213
The retail market for video rentals is a monopolistically competitive
market. A greater supply of video rental outlets along with the increased
availability of substitutes like cable channels would likely make rental
rates
decrease slightly
remain unchanged
crash
fluctuate wildly up and down
increase
214
Which of the following is not a threat to bricksandmortar video rental
stores?
ondemand movies delivered by broadband cable

rental services that deliver DVDs by mail
digital movies and TV shows available on Wal
Mart's Web site
None of the answers is a threat.
All of the answers are threats.
215
In regards to monopolistic competition, some economists argue that
consumers are willing to pay a higher price in order to enjoy a wider
selection of goods and services.
True
False
216
If the leading canned soup company introduces dozens of new flavors in
order to dominate shelf space, the company is most likely trying to create
a barrier to entry by
increasing the total investment needed to reach

the minimum efficient size
spending more on advertising than potential
competitors can afford
exploiting economies of scale
crowding out the competition
establishing an undifferentiated oligopoly
217
To maximize cartel profit, the members must allocate output so that the
marginal cost for the final unit produced by each firm is
identical
unequal
negative
equal to the firm's average total cost
maximized
218
Consensus becomes easier to achieve as the number of firms in a cartel
grows
True
False
219
In the prisoner's dilemma game, the sentence that each player receives
depends on
neither strategy chosen

only the strategy the player chooses
only the strategy the other player chooses
the strategy the player chooses and on the
strategy the other player chooses
None of the answers is correct.
220
In a coordination game, a Nash equilibrium occurs when
each player ignores the strategy of the other player
each player chooses no strategy, but maintains the

status quo
each player chooses the same strategy
one player can improve the outcome by changing
strategy
None of the answers is correct.
221
If oligopolists engaged in some sort of collusion, industry output would be
__________ and the price would be __________ than under perfect
competition.
smaller, lower
smaller, higher
smaller, no different
greater, lower
greater, higher
222 Exhibit 1015
Dan'l Boone Tobacco
Advertise Don't advertise
Advertise 1150, 1150 2020, 630

Eagle
Don't Tobacco
630, 2020 1500, 1500
advertise
Exhibit 1015 depicts the payoff matrix facing Eagle Tobacco and Dan'l
Boone Tobacco with respect to their decisions to advertise or not. What
strategies will maximize their joint profit?
Eagle advertise and Dan'l Boone doesn't

both advertise
Eagle doesn't advertise and Dan'l Boone does
neither advertises
can't tell
223
Exhibit 1015
Dan'l Boone Tobacco
Advertise 1150, 1150 2020, 630

Eagle
Don't Tobacco
630, 2020 1500, 1500
advertise
Boone Tobacco with respect to their decisions to advertise or not. What
strategies will most likely result?
Eagle advertise and Dan'l Boone doesn't

both advertise
Eagle doesn't advertise and Dan'l Boone does
neither advertises
can't tell
224 Exhibit 1015
Dan'l Boone Tobacco
Advertise 1150, 1150 2020, 630

Eagle
Don't Tobacco
630, 2020 1500, 1500
advertise
Boone Tobacco with respect to their decisions to advertise or not. Eagle
Tobacco has a dominant strategy.
True
False
225
Exhibit 1015
Dan'l Boone Tobacco
Advertise 1150, 1150 2020, 630

Eagle
Don't Tobacco
630, 2020 1500, 1500
advertise
Tobacco's dominant strategy is not to advertise.
True
False
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"In the first place there arose in the provinces of Chih Li

and Shantung a kind of rebellious subjects who had been in the
habit of practicing boxing and fencing in their respective
villages, and at the same time clothing their doings with
spiritualistic and strange rites. The local authorities failed
to take due notice of them at the time. Accordingly the
infection spread with astonishing rapidity. Within the space
of a month it seemed to make its appearance everywhere, and
finally even reached the capital itself. Everyone looked upon
the movement as supernatural and strange, and many joined it.
Then there were lawless and treacherous persons who sounded
the cry of 'Down with Christianity!' About the middle of the
fifth moon these persons began to create disturbances without
warning. Churches were burned and converts were killed. The
whole city was in a ferment. A situation was created which
could not be brought under control. At first the foreign
Powers requested that foreign troops be allowed to enter the
capital for the protection of the legations. The imperial
government, having in view the comparative urgency of the
occasion, granted the request as an extraordinary mark of
courtesy beyond the requirements of international intercourse.
Over five hundred foreign troops were sent to Pekin. This
shows clearly how much care China exercised in the maintenance
of friendly relations with other countries.
"The legations at the capital never had much to do with the

people. But from the time foreign troops entered the city the
guards did not devote themselves exclusively to the protection
of their respective legations. They sometimes fired their guns
on top of the city walls and sometimes patrolled the streets
everywhere. There were repeated reports of persons being hit
by stray bullets. Moreover they strolled about the city
without restraint, and even attempted to enter the Tung Hua
gate (the eastern gate of the palace grounds). They only
desisted when admittance was positively forbidden. On this
account, both the soldiers and the people were provoked to
resentment, and voiced their indignation with one accord.
Lawless persons then took advantage of the situation to do
mischief, and became bolder than ever in burning and killing
Christian converts. The Powers thereupon attempted to
reinforce the foreign troops in Pekin, but the reinforcements
encountered resistance and defeat at the hands of the
insurgents on the way and have not yet been able to proceed.
The insurgents of the two provinces of Chih Li and Shantung
had by this time effected a complete union and could not be
separated. The imperial government was by no means reluctant
to issue orders for the entire suppression of this insurgent
element. But as the trouble was so near at hand there was a
great fear that due protection might not be assured to the
legations if the anarchists should be driven to extremities,
thus bringing on a national calamity. There also was a fear
that uprisings might occur in the provinces of Chih Li and
Shantung at the same time, with the result that both foreign
missionaries and Chinese converts in the two provinces might
fall victims to popular fury. It was therefore absolutely
necessary to consider the matter from every point of view.
"As a measure of precaution it was finally decided to request

the foreign ministers to retire temporarily to Tien-Tsin for
safety. It was while the discussion of this proposition was in
progress that the German minister, Baron Von Ketteler, was
assassinated by a riotous mob one morning while on his way to
the Tsung-Li-Yamen. On the previous day the German minister
had written a letter appointing a time for calling at the
Tsung-Li-Yamen. But the Yamen, fearing he might be molested on
the way, did not consent to the appointment as suggested by
the minister. Since this occurrence the anarchists assumed a
more bold and threatening attitude, and consequently 'it was
not deemed wise to carry out the project of sending the
diplomatic corps to Tien-Tsin under an escort. However, orders
were issued to the troops detailed for the protection of the
legations to keep stricter watch and take greater precaution
against any emergency.
"To our surprise, on the 20th of the fifth moon (June 16th),
foreign (naval?) officers at Taku called upon Lo Jung Kwang,
the general commanding, and demanded his surrender of the
forts, notifying him that failing to receive compliance they
would at two o'clock the next day take steps to seize the
forts by force. Lo Jung Kwang, being bound by the duties of
his office to hold the forts, how could he yield to the
demand? On the day named they actually first fired upon the
forts, which responded, and kept up fighting all day and then
surrendered. Thus the conflict of forces began, but certainly
the initiative did not come from our side. Even supposing that
China were not conscious of her true condition, how could she
take such a step as to engage in war with all the Powers
simultaneously? and how could she, relying upon the support of
anarchistic populace, go into war with the Powers?
{115}
"Our position in this matter ought to be clearly understood by

all the Powers. The above is a statement of the wrongs we have
suffered, and how China was driven to the unfortunate position
from which she could not escape. Our several ministers will make
known accurately and in detail the contents of this decree and
the policy of China to the ministers of foreign affairs in
their respective countries, and assure them that military
authorities are still strictly enjoined to afford protection
to the legations as hitherto to the utmost of their power. As
for the anarchists they will be as severely dealt with as
circumstances permit. The several ministers will continue in
the discharge of the duties of their office as hitherto
without hesitation or doubt. This telegraphic decree to be
transmitted for their information. Respect this."
CHINA: A. D. 1900 (June-July).

Failure of attempt to entrust Japan with the rescuing of
the Legations at Peking.
A British Blue Book, issued on the 18th of February, 1901,

contains correspondence that took place between the Powers
late in June and early in July, looking to an arrangement for
the immediate sending of a large force from Japan to the
rescue of the beleaguered Legations in Peking. As summarized
in the "London Times," this correspondence showed that "the
necessity of asking the help of the only Power that was near
enough to intervene promptly was strongly pressed by Lord
Salisbury on the other Powers in the beginning of July. M.
Delcassé fell in entirely with the scheme and insisted on the
need of putting aside all jealousies or afterthoughts which
might hinder unity of action on the spot. The Russian
Government, however, seems to have misunderstood Lord
Salisbury's meaning and to have conceived him to wish Japan to
settle the Chinese crisis by herself and with a view to her
own interests, a misunderstanding which it required a whole
series of despatches to clear up completely. The Japanese
Government itself showed the most commendable readiness to
act, and on July 11 Mr. Whitehead telegraphed from Tokio, in
reply to an appeal from Lord Salisbury to the Japanese
Government, that 'in consequence of the friendly assurances'
given by Lord Salisbury the Japanese Government had decided to
send one or two more divisions to China. To this Lord
Salisbury replied on July 13 that her Majesty's Government
were willing to assist the Japanese Government up to
£1,000,000 if they at once mobilized and despatched an
additional 20,000 men to Peking. But the latter, in the
absence of any definite scheme of operations on the part of
the Powers, showed an unwillingness to accede to this
proposal, which thus fell through."
CHINA: A. D. 1900 (June-August).

The siege of the Foreign Legations at Peking.
The story of two dreadful months as told by one of the besieged.
The most detailed and altogether best account of the dreadful
experience which the foreigners besieged in the quarter of the
Legations at Peking underwent, from the first week in June
until the 14th day of August, when a rescuing army forced its
way into the city, is that furnished to the "London Times" by
its Peking correspondent, who was one of the besieged. His
narrative, forwarded immediately upon the opening of
communication with the outer world, was published in "The
Times" of October 13 and 15. With some abridgment it is given
here under permission from the Manager of "The Times."
"Missionaries in Peking began collecting together into the

larger mission compounds for common protection. Many ladies
went for safety into the British Legation. Railway
communication was now severed and the telegraph communication
threatened. Our isolation was being completed. In the country
disaffection spread to the districts to the east of Peking,
and the position of the American missionaries at Tung-chau
became one of great danger. It was decided to abandon their
great missionary establishments, and with the native
Christians that could follow them to come into Peking. They
asked for an escort, but Mr. Conger felt himself compelled to
decline one, on the ground that he did not venture to send the
small body of men that he could spare from the Legation
through so dangerous a district. Protection must be looked for
from the Chinese Government. What soldiers could not be sent
to do one fearless American missionary succeeded in doing.
Late in the evening of June 7 the Rev. W. S. Ament, of the
Board Mission, left Peking in a cart, and with 20 other carts
journeyed 14 miles to Tung-chau through a country palpitating
with excitement. It was an act of courage and devotion that
seemed to us who knew the country a deed of heroism. His
arrival was most opportune. He brought safely back with him to
Peking the whole missionary body then in Tung-chau—five men,
including the author of 'Chinese Characteristics,' 11 ladies,
and seven children, together with their Christian servants. …
"More troops were sent for to reinforce the Legation guards in
Peking, but they were sent for too late. Already many miles of
the railway had been torn up, and it was hopeless to expect an
early restoration of communication. … The Empress-Dowager and
the Emperor, who had been for some time past at the Summer
Palace, returned to Peking, entering the city at the same hour
by different gates. Large escorts of cavalry and infantry
accompanied them; Manchu bannermen in large numbers were
posted on the walls. It was noticeable that the body-guard of
the Empress was provided by the renegade Mahomedan rabble of
Tung-fuh-siang, who had long been a menace to foreigners in
the province. The return of the Court was expected to have a
tranquillizing effect upon the populace. But this was not the
case. Students were attacked when riding in the country; our
race-course, grand stand, and stables were burnt by 'Boxers'
armed with knives; Europeans could not venture along the
streets outside the foreign quarter without being insulted.
People were saying everywhere, 'The foreigners are to be
ended.' Streets were being patrolled by cavalry, but there was
every fear that the patrols were in league with the 'Boxers,'
who were marching through the streets bearing banners
inscribed 'Fu Ching Mieh Yang.' 'Protect Pure (the Dynasty),
exterminate the foreigner.'
"The London Mission and the Society for the Propagation of the
Gospel handed over their buildings to the Chinese authorities,
holding them responsible for their safe keeping, and all
missionaries and their families went to the British Legation.
The American Board Mission likewise delivered over their
valuable property to the Government and fell back upon the
great Methodist Episcopalian Mission near the Hata Mên Gate,
beyond the foreign quarter. Tung-chau missionaries and their
families and several hundred Christian converts were already
gathered there. Steps were at once taken to fortify the
compound. Under the direction of Mr. F. D. Gamewell deep
trenches were cut, earthworks thrown up, and barbed-wire
entanglements laid down.
{116}
Watch was kept and sentries posted, provisions laid in, and
all preparations made to withstand a siege. Twenty marines and
a captain from the American Legation were sent as a guard, and
some spare rifles were obtained from the British Legation.
Converts were armed with pikes and knives, and a determined
effort was to be made in case of attack. The mission was,
however, absolutely at the mercy of any force holding the high
city wall and Hata Mên Gate. Without the power of reply the
small garrison could have been shot down from the wall, which
is little more than a stone's throw from the nearest point of
the compound. Shell-fire such as was subsequently used against
the Legations would have smashed the buildings into fragments.
All the Maritime Customs staff and their families living in
the East City, a mile or more beyond the foreign quarter, the
professors and teachers of the Tung-wen-Kuan, Dr. Dudgeon, Mr.
Pethick, the secretary of Li Hung Chang, and others, were
forced to abandon their homes and come in for protection.
Preparations for defence went on at all the Legations, for it
was now inevitable that we should have to fight. A 'conseil de
guerre' was held, attended by all the military officers, and a
plan of defence determined. The palace and grounds of Prince
Su, opposite the British Legation, were to be held for the
Christian refugees, and an area was to be defended some half a
mile long by half a mile broad, bounded by the Austrian and
Italian Legations to the east, the street running over the
north bridge of the canal to the north, the British, Russian,
and American Legations to the west, while the southern
boundary was to be the street running at the foot of the great
City Wall from the American Legation on the west, past the
German Legation on the east, to the lane running from the Wall
north past the French Legation, the buildings of the
Inspectorate General of Customs, and the Austrian Legation.
All women and children and non-combatants were to come into
the British Legation. Each position was to be held as long as
possible, and the final stand was to be made at the British
Legation. No question of surrender could ever be entertained,
for surrender meant massacre.
"On the 10th it was announced that reinforcements were on the

way and that they were coming with the approval of the Viceroy
and of the Chinese Government, an approval more readily
accorded since it was known to the Viceroy that the troops
could not come by train. More than one of the Ministers was so
confident that they were coming that carts were sent to await
their arrival at Machia-pu, the terminal railway station at
Peking. … Then Government gave its first public official
recognition of the 'Boxers' by announcing that the notorious
chief of the 'Boxers,' Prince Tuan, had been appointed
President of the Tsung-li-Yamên. Prince Ching was superseded
but was not removed from the Yamên. One harmless old Chinese,
Liao Shou-hêng was sent into retirement while four rabidly
anti-foreign Manchus entirely ignorant of all foreign affairs
were appointed members. The last hope of any wisdom springing
from the Yamên disappeared with the supersession of Prince
Ching by the anti-foreign barbarian who, more than any other
man in China, was responsible for the outbreak. The following
morning most of the Europeans rode to Machia-pu to await the
arrival of the foreign troops. They waited, but no troops
came, and then rode back past the jeering faces of hordes of
Chinese soldiers. Our security was not increased by this
fiasco.
"Soldiers sent to guard the summer residences of the British

Legation in the Western Hills left their posts during the
night. The buildings had been officially placed under the
protection of the Imperial Government. In the pre-arranged
absence of the soldiers the buildings were attacked by
'Boxers' and entirely burnt to the ground; the soldiers
witnessed if they did not assist in the burning. But worse
events were to happen that day. In the afternoon news passed
through Peking that Mr. Sugiyama, the Chancellor of the
Japanese Legation, had been murdered by soldiers. He had been
sent by his Minister a second time to Machia-pu to await the
arrival of the troops. Passing unarmed and alone in his cart
beyond the Yung-ting Mên, the outer gate on the way to the
station, he was seized by the soldiers of Tung-fuh-siang,
dragged from his cart, and done to death in the presence of a
crowd of Chinese who witnessed his struggles with unpitying
interest and unconcealed satisfaction. …
"On the 12th a deputation, consisting of Chi Hsiu, a member of

the Grand Council and newly appointed to the Yamên, Hsu
Ching-chêng, the ex-Minister, the 'Boxer' leader Chao
Shu-chiao, and another Manchu, called upon the British
Minister. Chi Hsiu made a long address, his theme being the
enduring nature of the friendship between China and England
and the duty which China has always recognized as a sacred
obligation to protect the members of the Legations who were
her guests and the strangers within her walls. Chi Hsiu
assured the Minister that the movement was at an end, that all
was now tranquil, and that there was no more reason to fear.
Yet the very next day Baron von Ketteler himself captured a
'Boxer' from amid the crowd in Legation-street. He carried the
consecrated headpiece, and was armed with a sword. Round his
waist he had a belt containing a talisman of yellow paper
smeared with mystic red symbols by which he was rendered
'impermeable to foreign bullets.' And in the afternoon the
'Boxers' came down in force from the north of the city and the
burning of foreign buildings began. The cry arose that the
'Boxers' were coming. Every man ran to his post, a cordon was
established round the foreign quarter and no one was allowed
to pass. Guards were on watch at all the Legations, but their
numbers, spread over so many posts, were very inadequate, and
they were still further reduced by the guards detached for
duty at the Pei-tang Cathedral, where, three miles distant
within the Imperial City, were gathered in the one great
compound Mgr. Favier, the Bishop, his coadjutor, Mgr. Jarlin,
the missionaries and lay brothers, the sisters of charity, and
a vast concourse of Christian refugees, estimated at 2,000,
who had fled from the massacre in the country. A guard of five
Austrians was sent to the Belgian Legation. The Austrians with
their machine gun commanded the Customs-street leading to the
north: the Italians with a one pounder commanded the
Legation-street to the east. The British with their
Nordenfeldt swept the Canal-street to the north and the
North-bridge, the Russians were on the South-bridge, while the
Americans with their Colt machine gun had command of
Legation-street to the west as far as the court facing the
Imperial Palace. The Russians, having no gun, dropped their
heavy ammunition down the well.
{117}
"As darkness came on the most awful cries were heard in the
city, most demoniacal and unforgettable, the cries of the
'Boxers,' 'Sha kweitze'—'Kill the devils'—mingled with the
shrieks of the victims and the groans of the dying. For
'Boxers' were sweeping through the city massacring the native
Christians and burning them alive in their homes. The first
building to be burned was the chapel of the Methodist Mission
in the Hata Mên-street. Then flames sprang up in many quarters
of the city. Amid the most deafening uproar the Tung-tang, or
East Cathedral, shot flames into the sky. The old Greek Church
in the north-east of the city, the London Mission buildings,
the handsome pile of the American Board Mission, and the
entire foreign buildings belonging to the Imperial Maritime
Customs in the East City burned throughout the night. It was
an appalling sight. Late in the night a large party of
'Boxers' bearing torches were seen moving down Customs-street
towards the Austrian Legation. The machine gun mounted was in
waiting for them. They were allowed to come within 150 yards
in the open street near the great cross road, and then the
order was given and the gun rained forth death. It was a
grateful sound. The torches disappeared. They had come within
a restricted space, and none, we thought, could have escaped.
Eagerly we went forth to count the dead, expecting to find
them in heaps. But there was not one dead. The gun had been
aimed very wide of the mark. Two hundred yards north of the
'Boxers' there is a place where 30 ft. above the level road
the telegraph wires crossed to the station. Next morning they
were found to have been cut by the Austrian fire. The only
persons who suffered injury were possible wayfarers two miles
up the street. There can be little doubt that this fiasco
helped to confirm the Boxers in a belief in their
invulnerability.
"The Tung-tang, or East Cathedral, having been burned, it, was

clear that the Nan-tang, the South Cathedral, was in danger.
Père Garrigues, the aged priest of the Tung-tang, had refused
to leave his post and had perished in the flames. But the
fathers and sisters at the Nan-tang might yet be saved. Their
lives were in great peril; it was necessary to act quickly. A
party of French gentlemen, led by M. Fliche of the French
Legation and accompanied by M. and Mme. Chamot, rode out at
night, and early the following morning safely escorted to the
hotel every member of the mission—Père d' Addosio and his two
colleagues, a French brother, five sisters of charity, and
some twenty native nuns of the Order of Josephine. They were
rescued just in time. Scarcely had they reached a place of
safety when the splendid edifice they had forsaken was in
flames. … It continued burning all day, the region round it,
the chief Catholic centre of Peking, being also burnt. Acres
of houses were destroyed and the Christians in thousands put
to the sword. …
"On the 15th rescue parties were sent out by the American and
Russian Legations in the morning, and by the British and
German Legations in the afternoon, to save if possible native
Christians from the burning ruins around the Nan-tang. Awful
sights were witnessed. Women and children hacked to pieces,
men trussed like fowls, with noses and ears cut off and eyes
gouged out. Chinese Christians accompanied the reliefs and ran
about in the labyrinth of network of streets that formed the
quarter, calling upon the Christians to come out from their
hiding-places. All through the night the massacre had
continued, and 'Boxers' were even now shot redhanded at their
bloody work. But their work was still incomplete, and many
hundreds of women and children had escaped. They came out of
their hiding-places crossing themselves and pleading for
mercy. It was a most pitiful sight. Thousands of soldiers on
the wall witnessed the rescue; they had with callous hearts
witnessed the massacre without ever raising a hand to save.
During the awful nights of the 13th and 14th Duke Lan, the
brother of Prince Tuan, and Chao Shu-Chiao, of the
Tsung-li-Yamên, had followed round in their carts to gloat
over the spectacle. Yet the Chinese Government were afterwards
to describe this massacre done under official supervision
under the very walls of the Imperial Palace as the handiwork
of local banditti. More than 1,200 of the poor refugees were
escorted by the 'foreign devils' to a place of safety. Many
were wounded, many were burnt beyond recognition. All had
suffered the loss of every thing they possessed in the world.
They were given quarters in the palace grounds of Prince Su,
opposite the British Legation. Among them was the aged mother
and the nephew of Ching Chang, recently Minister to France,
and now Chinese Commissioner to the Paris Exhibition. The
nephew was cruelly burnt; nearly every other member of the
family was murdered. A Catholic family of much distinction—a
family Catholic for seven generations—was thus almost
exterminated and its property laid in ashes. It was announced
this day that only 'Boxers' might enter the Imperial City. The
Government was rushing headlong to its ruin.
"On June 16 a party of twenty British, ten Americans, and five

Japanese, with some Volunteers, and accompanied by
Lieutenant-Colonel Shiba, the Japanese military attache,
patrolled the East City, visiting the ruins in the hopes that
some Christians might yet be in hiding. But to our calls
everywhere no reply was given. Refugees, however, from the
East City had managed to escape miraculously and find their
way, many of them wounded, to the foreign Legations, seeking
that protection and humanity that was denied them by their own
people. As the patrol was passing a Taoist temple on the way,
a noted 'Boxer' meeting place, cries were heard within. The
temple was forcibly entered. Native Christians were found
there, their hands tied behind their backs, awaiting execution
and torture. Some had already been put to death, and their
bodies were still warm and bleeding. All were shockingly
mutilated. Their fiendish murderers were at their incantations
burning incense before their gods, offering Christians in
sacrifice to their angered deities. They shut themselves
within the temple, but their defence availed them nothing.
Everyone of them, 46 in all, was in 'Boxer' uniform armed with
sword and lance. Retribution was swift; every man was shot to
death without mercy. In the afternoon a fire broke out in the
foreign drug store in the native city outside the great gate
of the Chien Mên.
{118}
It was the work of 'Boxers,' done while the soldiers were
looking on. In order to burn the foreign drug store and do the
foreigners a few pounds worth of damage, they did not hesitate
to jeopardize by fire property worth millions of pounds, and that
is what happened. Adjoining buildings took fire, the flames
spread to the booksellers' street, and the most interesting
street in China, filled with priceless scrolls, manuscripts,
and printed books, was gutted from end to end. Fire licked up
house after house, and soon the conflagration was the most
disastrous ever known in China, reducing to ashes the richest
part of Peking, the pearl and jewel shops, the silk and fur,
the satin and embroidery stores, the great curio shops, the
gold and silver shops, the melting houses, and nearly all that
was of the highest value in the metropolis. Irreparable was
the damage done. …
"During the night the Americans, fearing an attack from the

street at the back of their Legation, kept the street clear
till daybreak. During one of the volleys four of the
Tsung-li-Yamên Ministers called upon the American Minister.
They were blandly assuring him that all was now quiet, that
there was no need for further alarm, that great was the
tenderness of the Throne for men from afar, when a rattle of
musketry was heard which rendered them speechless with fear.
They hurriedly went away. Assurances of the Throne's
tenderness did not deceive us. Our barricades were everywhere
strengthened and defences systematically planned, for rumour
was quick to reach us that the relief forces had been driven
back to Tien-tsin, and this did not add to the security of our
position. Inside the Imperial City wall, within one hundred
yards of the British picket on the north bridge a large
Chinese camp was formed. Peking was in a state of panic, all
the streets near the foreign quarters were empty, and people
were fleeing from the city. There was a run on the banks, and
the Ssu-ta-hêng, the four great banks, the leading banks of
Peking, closed their doors, and paper money was not in
circulation. The Palace of Prince Su was occupied by the
refugees, and its defence, the most important of all and a
vital one to the British Legation, was entrusted to Colonel
Shiba and Japanese marines and volunteers.
"The crisis was approaching. On the morning of June 19 Mr.

Cordes, the Chinese Secretary of the German Legation, was at
the Yamên, when the secretaries told him that the allied
fleets had taken the Ta-ku forts on June 17. This was
remembered when at 4.30 in the afternoon an ultimatum was sent
to the foreign Ministers. It was a bolt from the blue. They
were to leave Peking within 24 hours. 'A despatch,' they
wrote, 'has arrived from the Viceroy Yu Lu, forwarding a note
which he has received from the doyen of the Consular body in
Tien-tsin, the French Comte du Chaylard, to say that, unless
foreign troops are at once permitted to land at Tien-tsin, the
allied fleets will bombard the Ta-ku forts. As this is
equivalent to a declaration of war, the Tsung-li-Yamên
herewith notify the foreign Ministers that they must leave
Peking within 24 hours, otherwise protection cannot be
guaranteed to them. They will be given safe conduct and
transport.' It was quite in accordance with Chinese custom
that a despatch saying that the seizure of the Ta-ku forts had
been threatened should be sent after the seizure had been
effected. What is distasteful to them to say they avoid
saying. A meeting of the diplomatic body was at once held. It
was decided to accept the ultimatum. They had been given their
passports by the Chinese Government; what other course was
open to them? … Word was passed round that preparation had to
be made to leave Peking the following day. Mr. Conger, the
American Minister, asked for 100 carts; and his Legation spent
most of the night making preparations. No packing was done at
the British Legation, for it was there considered
inconceivable that China should insist upon sending the
Ministers their passports. Only two days before, in the
'Peking Gazette' of June 17, it had been officially announced
that the road to Tien-tsin was unsafe. … When the decision of
the Diplomatic Body became known in Peking the most profound
indignation was everywhere expressed at so unworthy a decision
and the most profound astonishment that such a course of
action should have received the support of M. Pichon, the
French Minister 'Protecteur des Missions Catholiques en
Chine,' and of so humane a man as Mr. Conger, the American
Minister; for to leave Peking meant the immediate abandonment
to massacre of the thousands of native Christians who had
trusted the foreigner and believed in his good faith.
"Early on the morning of the 20th a meeting of the Diplomatic

Body was held at the French Legation. No reply had been
received from the Tsung-li-Yamên to the request for an
audience, and the proposition that all the Ministers should go
to the Yamên found no seconder. Had it been carried out, there
would have occurred one of the most appalling massacres on
record. Two chairs later left for the Yamên. In the first was
the German Minister, Baron van Ketteler, who had this
advantage over the other Ministers, that he spoke Chinese
fluently. In the second was the Chinese Secretary of the
German Legation, Mr. Cordes. News travels quickly in Peking.
Not many minutes later my boy burst into my office—'Any man
speakee have makee kill German Minister!' It was true. The
German Minister had been assassinated by an Imperial officer.
The Secretary had been grievously wounded, but, running for
his life, shot at by a hundred rifles, had escaped as if by a
miracle. A patrol of 15 men under Count Soden, the commander,
went out to recover the body. Fired on by Chinese soldiers
from every side, they were forced to retire. … There was no
more question about leaving for Tien-tsin. Later in the day
the Yamên, evidently indifferent to the gravity of the
position created by the Government, sent an impudent despatch
to the German Legation to the effect that two Germans had been
proceeding in chairs along the Hata Mên-street, and at the
mouth of the street leading to the Tsung-li-Yamên one of them
had fired upon the crowd. The Chinese had retaliated and he
had been killed. They wished to know his name. No reply was
sent, for it was felt to be a mockery. Only too well the Yamên
knew whom they had murdered. Weeks passed before the body was
recovered, and it was not until July 18 that any official
reference was made to the murder. In the course of the morning
a despatch was sent to the Diplomatic Body in reply to the
answer they had sent to the ultimatum of yesterday.
{119}
The country, it said, between Peking and Tien-tsin was overrun
with brigands, and it would not be safe for the Ministers to go
there. They should therefore remain in Peking. It is difficult
to write with calmness of the treachery with which the Chinese
were now acting. Four p. m. was the hour given in the ultimatum
for the Ministers to vacate their Legations, but the ultimatum
had been rescinded, and the Ministers invited to remain in
Peking. Thus it was hoped that they would be lulled into a
false security. Chinese soldiers were secretly stationed under
cover at every vantage point commanding the outposts. At 4 p.
m. precisely to the minute, by preconcerted signal, they
opened fire upon the Austrian and French outposts. A French
marine fell shot dead through the forehead. An Austrian was
wounded. The siege had begun.
"At this time (June 20), at the opening of the siege, the
total strength of the combined Legation guards consisted of 18
officers and 389 men, distributed as follows:
"American.
Three officers, Captain Myers in command, Captain Hall,
Surgeon Lippett, and 53 marines from the Newark.
"Austrian.
Five officers, Captain Thomann, the Commander of the Zenta,
Flag-Lieutenant von Winterhalder, Lieutenant Kollar,
two mid-shipmen, and 30 marines from the Zenta.
"British.
Three officers, Captain B. M. Strouts in command,
Captain Halliday, Captain Wray, and 79 men R. M. L. I.
-30 from H. M. S. Orlando and 49 from Wei-hai-wei.
"French.
Two officers, Captain Darcy and Midshipman Herbert, and
45 marines from the D'Entrecasteaux and Descartes.
"German.
Lieutenant Graf Soden and 51 marines of the
3rd Battalion Kiao-chau.
"Italian.
Lieutenant Paolini and 28 blue-jackets from the Elba.
"Japanese.
Lieutenant Hara and 24 marines from the Atago.
"Russian.
Two officers, Lieutenant Baron von Rahden and Lieutenant
von Dehn, and 79 men—72 marines from the Sissoi Veliki and
Navarin and seven Legation Cossacks.
"Total,
18 officers and 389 men.
"In addition the French sent Lieutenant Henry and 30 men to

guard the Pei-tang Cathedral, and the Italians detached one
officer, Lieutenant Cavalieri, and 11 men for the same humane
mission. To this insignificant force of 18 officers and 389
men of eight nationalities the entire foreign quarter had to
trust for its defence. Fortunately several visitors or
residents had received military training, and they at once
went on the active list and rendered invaluable service. … A
volunteer force numbering altogether 75 men, of whom 31 were
Japanese, was enrolled and armed with all available rifles.
They added greatly to the strength of the garrison, taking
watch and watch like the Regulars, fighting behind the
barricades, and never shrinking from any duty imposed upon
them. There was also an irregular force of 50 gentlemen of
many nationalities, who did garrison guard duty in the British
Legation and were most useful. They were known, from the
gentleman who enrolled them, as 'Thornhill's Roughs,' and they
bore themselves as the legitimate successors on foot of
Roosevelt's Roughriders. Armed with a variety of weapons, from
an elephant rifle to the 'fusil de chasse' with a picture of
the Grand Prix, to all of which carving knives had been lashed
as bayonets, they were known as the 'Carving Knife Brigade.' …
Such were the effective forces. They were provided with four
guns, an Italian one-pounder with 120 rounds, an American Colt
with 25,000 rounds, an Austrian machine gun, and a British
five-barrel Nordenfelt, pattern 1887. Rifle ammunition was
very scanty. The Japanese had only 100 rounds apiece, the
Russians 145, and the Italians 120, while the best provided of
the other guards had only 300 rounds per man, none too many
for a siege the duration of which could not be foreseen.
"Punctually, then, at 4 o'clock Chinese soldiers began firing

upon us whom they had requested to remain in peace at Peking.
And immediately after the Austrian Legation was abandoned. No
sufficient reason has been given for its abandonment, which
was done so precipitately that not an article was saved. It
was left to the mercy of the Chinese, and the guard retired to
the corner of Customs-lane, leading west to the Prince's
Palace. This involved the sacrifice of Sir Robert Hart's and
all the Customs buildings, and hastened the advance of the
Chinese westward. As previously arranged, the American mission
buildings had been abandoned in the morning, for they were
quite untenable. All the missionaries, their wives, and
families crossed over to the British Legation. Converts to the
number of several hundreds joined the other refugees. The
captain and 20 American marines returned to the American
Legation. By an error of judgment on the part of the captain
the mission was finally left in a panic. Almost nothing was
saved, and nearly all the stores accumulated for a siege were
lost. The British Legation was now thronged. Rarely has a more
cosmopolitan gathering been gathered together within the limits
of one compound. All the women and children were there, all
the missionaries, American, British, French, and Russian, all
the Customs staff, the French, Belgian, Russian, American,
Spanish, Japanese, and Italian Ministers, and their families,
the entire unofficial foreign community of Peking, with the
exception of M. Chamot, who remained in his hotel throughout,
though it was in the hottest corner of the besieged area. …
French volunteers bravely stood by their own Legation, and the
Austrian Charge d'Affaires and Mme. von Rosthorn remained there
as long as there was a room habitable. Mr. Squiers, the first
Secretary of the American Legation, with Mr. Cheshire, the
Chinese Secretary, and Mr. Pethiek, the well-known private
secretary of Li Hung Chang, stayed by the United States
Legation, and the staff of the German Legation also kept
stanchly to their posts. … At the British Legation
fortification began in real earnest, the refugees working like
coolies. Sand-bags were made by the thousand, and posts
mounted round the Legation. A way was knocked through the
houses to the Russian Legation, so that the Americans, if they
had to fall back, could pass through to the British Legation.
During the day every Legation was exposed to a continuous fire
from surrounding house-tops, and in the case of the British
Legation from the cover in the Imperial Carriage Park. Chinese
put flames to the abandoned buildings, and the Belgian
Legation, the Austrian Legation, the Methodist Mission, and
some private houses were burned.
{120}
"June 22 opened disastrously. The evening before, Captain

Thomann, the Austrian commander, announced that as the senior
officer he had taken command in Peking. This morning, hearing
from an irresponsible American that the American Legation was
abandoned, he, without taking steps to verify the information,
ordered the abandonment of all the Legations cast of
Canal-street, the detachments to fall back upon the British
Legation. There had been no casualties to speak of, none of
the Legations had been attacked, and every commander who
received the order to retreat regarded the action as madness.
Peremptory orders were sent to the Japanese to abandon the
Prince's Palace or Fu (as I shall henceforth call it), and
they retired to their Legation. In the British Legation
nothing was known of the order when, to the amazement of all,
the Italians, Austrians, and French came running down
Legation-street, followed a little later by the Japanese, and
subsequently by the Germans, who recalled their post on the
wall and marched without a shot being fired at them down under
the wall to Canal-street. Americans and Russians, learning
that all east of Canal-street had been abandoned, saw
themselves cut off, though their communications had not even
been menaced, and retreated precipitately into the British
Legation. It was a veritable stampede—a panic that might have
been fraught with the gravest disaster. Prompt action was
taken. Captain Thomann was relieved of his command, and Sir
Claude MacDonald, at the urgent instance of the French and
Russian Ministers, subsequently confirmed by all their

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is an alternate expression for monopoly

one firm selling several products

many firms, each selling a completely different

there are too many firms

each firm is large relative to the market

faces a perfectly elastic demand curve

is horizontal because Imelda's is small relative to

many firms with some control over price, and some

loses all of its customers (sales drop to zero)

making the product available at a number of

emphasizing that the product provides the same

developing a new video game or a computer

making sodium­free, caffeine­free colas

Product differentiation makes it harder for firms to

provide information to consumers with no additional

long­run economic profit will always be zero

they are physically or chemically different

the fewer the number of competing firms

In Exhibit 10­1, the monopolistic competitor's profit­maximizing level of

The monopolistic competitor in Exhibit 10­1 is in

long­run equilibrium because price equals average

In Exhibit 10­1, the monopolistic competitor's total economic profit at the

shut down because price is greater than average

The profit­maximizing price for the firm in Exhibit 10­3 is

At the profit­maximizing output, the firm in Exhibit 10­3 is earning

an economic profit of $38

At the profit­maximizing output, the monopolistically competitive firm in

long­run equilibrium because price equals average

guaranteed to earn zero economic profit

Produce 10 units at a price of $36 per unit.

In the short run, the firm in Exhibit 10­5 should

In the long run, the firm in Exhibit 10­5 can expect

In Exhibit 10­6, what is the profit­maximizing price for this monopolistic

In Exhibit 10­6, what is the maximum profit this monopolistic competitor

At the profit­maximizing output level, the firm in Exhibit 10­7 is

In the long run, the firm in Exhibit 10­7 can expect

to earn an economic profit of $760

change neither its price nor its output level

economic losses for each restaurant

economic losses for each restaurant

the marginal revenue curve lies above the average

charge more and sell less

produce 100 units of output and charge $15

if marginal revenue is less than price

perfect competition because the firms face

produce a greater variety of goods than do firms in

This firm maximizes profit at an output level of 25

This firm charges $50 for the good.

making sodiumfree, caffeinefree colas

longrun economic profit will always be zero

In Exhibit 101, the monopolistic competitor's profitmaximizing level of

The monopolistic competitor in Exhibit 101 is in

longrun equilibrium because price equals average

In Exhibit 101, the monopolistic competitor's total economic profit at the

The profitmaximizing price for the firm in Exhibit 103 is

At the profitmaximizing output, the firm in Exhibit 103 is earning

At the profitmaximizing output, the monopolistically competitive firm in

longrun equilibrium because price equals average

In the short run, the firm in Exhibit 105 should

In the long run, the firm in Exhibit 105 can expect

In Exhibit 106, what is the profitmaximizing price for this monopolistic

In Exhibit 106, what is the maximum profit this monopolistic competitor

At the profitmaximizing output level, the firm in Exhibit 107 is

In the long run, the firm in Exhibit 107 can expect

In Exhibit 1010, what is the maximum profit this monopolistic competitor

At the profitmaximizing output level, the firm in Exhibit 1011 is

that output level is less than the profitmaximizing

are guaranteed to earn shortrun economic profit

At the profitmaximizing (or lossminimizing) output and price, the firm in

earns no longrun economic profit and is therefore

in perfect competition, firms cannot earn a long

perfect competition, in that firms face downward