Question 1: A natural monopoly exists whenever a single firm ______.
- is owned and operated by the federal or local government
- is investor owned but has been granted the exclusive right by the government to operate in a market
- confronts economies of scale over the entire range of production that is relevant to its market
- has gained control over a strategic input of an important production process
Question 2: Marginal revenue for a monopolist is ______.
- equal to price
- greater than price
- less than price
- equal to average revenue
Question 3: In a monopoly in the long run ______.
- economic profits will be eliminated by the entry of rival firms
- economic profits will be reduced, but not eliminated entirely, by the entry of rival firms
- entry will not occur
- none of the above is true
Question 4: In monopoly _______.
- because P > MC, a basic condition for efficiency is violated
- consumers are confronted with a price that is lower than marginal cost
- consumers will consume more of the good than is economically efficient
- all of the above are true
Question 5: To practice effective price discrimination, a monopolist must be able to ______.
- estimate its own production and cost functions
- avoid detection by government regulatory agencies
- prevent the resale of goods among groups of buyers
- calculate the utility level of each buyer in the market
Question 6: A concentration ratio is used to measure ______.
- efficiency
- diseconomies of scale
- marginal cost
- market dominance
Question 7: If the only two firms in an industry agree to fix the price at a given level, this is an example of ______.
- collusion
- satisfying
- price extortion
- price leadership
Question 8: When firms openly agree on price, output, and other decisions aimed at achieving monopoly profits, those firms are practicing ______.
- overt collusion
- tacit collusion
- leadership price
- competitive game
Question 9: A cartel is an example of ______.
- price extortion
- price leadership
- overt collusion
- tacit collusion
Question 10: A dominant strategy equilibrium exists in a game when ______.
- every player has no choice
- every player makes the same choice, regardless of the action of the other players
- each player makes the best choice, given the choice of the other player
- no player is able to dictate the actions of any other player
Question 11: When one firm responds to a rival's cheating by cheating and to a rival's cooperation by cooperating, that firm is practicing a ______.
- dormant strategy
- trigger strategy
- conclusive strategy
- tit-for-tat strategy
Question 12: An industry characterized by many firms, producing similar but differentiated products, in a market with easy entry and exit is called ______.
- perfect competition
- monopoly
- monopolistic competition
- oligopoly
Question 13: In large shopping areas, the retail market is most illustrative of ______.
- monopolistic competition
- monopoly
- perfect competition
- perfect oligopoly
Question 14: A feature of monopolistic competition that makes it different from monopoly is the ______.
- fact that firms in the model of monopolistic competition follow the marginal decision rule while monopolies do not
- downward-sloping demand curve
- downward-sloping marginal revenue curve
- number of firms in the industry
Question 15: Product differentiation under monopolistic competition means that each firm ______.
- charges the same price
- maximizes profit where MC = P
- faces a downward-sloping demand curve
- receives economic profits
Question 16: Product differentiation under monopolistic competition means that each firm ______.
- charges slightly different prices
- has a pure monopoly
- maximizes profit where MC = P
- faces a horizontal demand curve
Question 17: Monopolistic competition within an industry results in ______.
- overutilization of plants
- chronic excess capacity
- less advertising than in perfect competition
- lower prices than in perfect competition
Question 18: Critics of advertising argue that it ______.
- tends to make markets more perfect
- leads to low-cost mass production
- results in higher prices to consumers
- encourages competition through new-product advertising
Question 19: If an activity generates external costs, decision makers generating the activity will ______.
- be faced with its full costs
- be faced with no costs
- not be faced with its full costs
- be faced with excessive costs
Question 20: A tax system _______ when it minimizes the direct and indirect costs to the economy of tax collection.
- is efficient
- is equitable
- has no deadweight loss
- is both A and B
Question 21: Criteria that economists use in selecting a tax system include ______.
- ability to pay and benefits received
- fairness
- only benefits received
- only ability to pay
Question 22: Sales taxes are considered to be ______.
- proportional
- progressive
- degressive
- regressive