1. Which of the following is most likely to be an implicit cost for Company X?
- Forgone rent from the building owned and used by Company X
- Rental payments on IBM equipment
- Payments for raw materials purchased from Company Y
- Transportation costs paid to a nearby trucking firm
2. The short run is characterized by
- plenty of time for firms to either enter or leave the industry.
- increasing, but not diminishing returns.
- fixed plant capacity.
- zero fixed costs.
3. An industry comprised of 40 firms, none of which has more than 3% of the total market for a differentiated product is an example of
- monopolistic competition.
- oligopoly.
- pure monopoly.
- pure competition.
4. Which of the following statements applies to a purely competitive producer?
- It will not advertise its product.
- In long-run equilibrium it will earn an economic profit.
- Its product will have a brand name.
- Its product is slightly different from those of its competitors.
5. Which of the following best approximates a pure monopoly?
- The foreign exchange market
- The Kansas City wheat market
- The only bank in a small town
- The soft drink market
6. Barriers to entering an industry
- encourage allocative efficiency.
- encourage productive efficiency.
- are the basis for monopoly.
- apply only to purely monopolistic industries.
7. The restaurant, legal assistance, and clothing industries are each illustrations of
- countervailing power.
- homogeneous oligopoly.
- monopolistic competition.
- pure monopoly.
8. Product variety is likely to be greater in
- monopolistic competition than in pure competition.
- pure competition than in monopolistic competition.
- homogenous oligopoly than in monopolistic competition.
- homogenous oligopoly than in differentiated oligopoly.
9. Which of the following is the best example of oligopoly?
- Women's dress manufacturing
- Automobile manufacturing
- Restaurants
- Cotton farming
10. An industry having a four-firm concentration ratio of 85%
- approximates pure competition.
- is monopolistically competitive.
- is a pure monopoly.
- is an oligopoly.
11. What is the LAW OF DIMINISHING RETURNS, and why is this law considered a short-run phenomenon?
12. Identify the primary characteristics of perfect competition and monopolistic competition. Give examples of each.