These multiple choice questions are from the exam bank. If you believe one or more answers are not correct, then speak with the instructor. He is human and makes mistakes.
Lesson 9 - Competitive Markets
1. Which of the following industries most closely approximates pure competition?
2. Which of the following is not a basic characteristic of pure competition?
A. considerable nonprice competition
3. If a firm in a purely competitive industry is confronted with an equilibrium price of $5, its marginal revenue:
A. may be either greater or less than $5.
4. Firms seek to maximize:
A. per unit profit.
5. A competitive firm will maximize profits at that output at which:
A. total revenue exceeds total cost by the greatest amount.
6. A purely competitive firm's short-run supply curve is:
A. perfectly elastic at the minimum average total cost.
7. Suppose you find that the price of your product is less than minimum AVC. You should:
A. minimize your losses by producing where P = MC.
8. If a purely competitive firm shuts down in the short run:
A. its loss will be zero.
9. In the short run a purely competitive firm will always make an economic profit if:
A. P = ATC.
10. In a purely competitive industry:
A. there will be no economic profits in either the short run or the long run.
11. Long-run competitive equilibrium:
A. is realized only in constant-cost industries.
12. A constant-cost industry is one in which:
A. resource prices fall as output is increased.
13. A purely competitive firm is precluded from making economic profit in the long run because:
A. it is a "price taker."
14. A decreasing-cost industry is one in which:
A. contraction of the industry will decrease unit costs.
15. Allocative efficiency is achieved when the production of a good occurs where:
A. P = minimum ATC.
Lesson 10 - Monopolies
1. Which of the following is correct?
A. Both purely competitive and monopolistic firms are "price takers."
2. Pure monopolists may obtain economic profits in the long run because:
A. of advertising.
3. Which of the following is not a barrier to entry?
4. A natural monopoly occurs when:
A. long-run average costs decline continuously through the range of demand.
5. The pure monopolist's demand curve is:
A. identical with the industry demand curve.
6. Price exceeds marginal revenue for the pure monopolist because the:
A. law of diminishing returns is inapplicable.
7. An unregulated pure monopolist will maximize profits by producing that output at which:
A. P = MC.
8. The supply curve for a monopolist is:
A. perfectly elastic.
9. Economic profit in the long run is:
A. possible for both a pure monopoly and a pure competitor.
10. X-inefficiency refers to a situation in which a firm:
A. is not as technologically progressive as it might be.
11. Price discrimination refers to:
A. selling a given product for different prices at two different points in time.
12. Which of the following conditions is not required for price discrimination?
A. Buyer with different elasticities must be physically separate from each other.
13. Which government price control lets a regulated monopoly set two prices: A fixed charge and a rate charge?
A. Ramsey Pricing
14. What is it called when a monopoly uses its wealth and power to influence the government in its favor?
A. Ramsey Pricing
15. If a regulatory commission wants to provide a natural monopoly with a fair return, it should establish a price that is equal to:
A. minimum average fixed cost.
Lesson 11 - Oligopolies and Monopolistic Competition
1. Monopolistic competition means:
A. a market situation where competition is based entirely on product differentiation and advertising.
2. Nonprice competition refers to:
A. competition between products of different industries, for example, competition between aluminum and steel in the manufacture of automobile parts.
3. If the number of firms in a monopolistically competitive industry increases and the degree of product differentiation diminishes:
A. the likelihood of realizing economic profits in the long run would be enhanced.
4. Nonprice competition refers to:
A. low barriers to entry.
5. When a monopolistically competitive firm is in long-run equilibrium:
A. P = MC = ATC.
6. Product variety is likely to be greater in:
A. monopolistic competition than in pure competition.
7. The term oligopoly indicates:
A. a one-firm industry.
8. The mutual interdependence that characterizes oligopoly arises because:
A. the products of various firms are homogeneous.
9. The copper, aluminum, cement, and industrial alcohol industries are examples of:
A. interproduct competition.
10. Mutual interdependence means that each oligopolistic firm:
A. faces a perfectly elastic demand for its product.
11. Concentration ratios measure the:
A. geographic location of the largest corporations in each industry.
12. The Herfindahl index for a pure monopolist is:
13. Interindustry competition means that:
A. in oligopolistic industries a few large firms compete with one another in bidding down product price.
14. OPEC provides an example of:
A. a tacit understanding.
15. Suppose the Herfindahl Indexes for industries A, B, and C are 1,200, 5,000, and 7,500 respectively. These data imply that:
A. market power is greatest in industry A.