1. _____ using specific business practices that increase a seller's market power and excludes other sellers is illegal under U.S. law.

Powering

Differentiating

Rationalizing

Monopolizing

2. Mergers harm society when they lead to

increased market power.

price reductions.

a higher number of companies.

cost savings.

3. What challenge does a government face when regulating price in a natural monopoly?

Costs will fall if the price is reduced, allowing the monopolist to maintain high profits.

Natural monopoly prices are not public, and so the government does not know the current price.

There is a net loss in social welfare when a competitive price is imposed on a natural monopoly.

Setting a price ceiling at the marginal cost of the last unit sold may cause the seller to have losses.

4. The degree of a seller's market power has an impact on the

seller's cost curves.

market demand curve for the seller's market.

seller's demand curve.

demand curves for individual customers of the seller.

5. Fiona has a monopoly on motorboat rentals on Nantucket Island during the summer. She can rent five boats per week at $11,000 each. If she wants to rent six, she can charge only $10,000 each. The quantity effect of renting the sixth motorboat is:

$11,000.

$10,000.

$15,000.

$21,000.

6. As the quantity sold rises, how does marginal revenue compare to price for a company with market power?

Marginal revenue maintains a constant difference from price.

Marginal revenue remains constant regardless of the price level.

Marginal revenue falls further and further below price.

Marginal revenue rises further and further below price.

7. What effect does increasing competition have on price for firms with market power?

Price enters a cycle of ups and downs.

It drives the price down to the level of costs.

It inspires product differentiation and higher prices.

It pushes the price up above marginal revenue.

8. The higher the level of market power among the sellers in a market, the _____ when the Rational Rule for Sellers is applied.

lower the market demand

closer marginal revenue is to price

higher the marginal cost

lower the market outpu

9. Imperfectly competitive sellers can earn higher profits because they

face demand curves that are more elastic.

tend to have lower cost curves than perfectly competitive sellers.

face a less extreme trade-off between higher prices and higher quantity.

are subject to less government regulation than perfectly competitive sellers.

10. Which of the following is NOT true about imperfect competition?

Sellers with market power can use independent pricing strategies.

Greater product differentiation decreases market power.

A smaller number of sellers in a market increases market power.

Imperfect competition among buyers gives them bargaining power.

11. Imperfect competition stems from _____ and whether or not the product is _____.

the product price; produced by all firms in the market

market power; a good or a service

the costs of production; identical across firms

the number of sellers; differentiated

12. In monopolistic competition, each firm:

cannot influence the price of the good.

has some ability to set the price of its differentiated good.

will follow a marginal cost pricing rule in the long run.

can produce a quantity of output whereby marginal revenue is greater than price.

13. A company is the only one producing its type of product. The company's owner is able to set price at the most profitable level. This company is in what type of market?

Oligopoly

Monopoly

Monopolistic competition

Perfect competition

14. A(n) _____ is an industry with only a small number of producers.

monopoly

oligopoly

perfectly competitive market

monopolistically competitive market

15. A characteristic of perfect competition that is not present in any other market structure is that there

are many sellers that produce identical products.

is only one seller and that seller holds a high level of market power.

are a small number of sellers and at least a few of them have market power.

are many sellers and each produces its own version of the product.

16. A price-taker is a seller that:

charges the current market price for its product.

takes all available information into consideration in deciding how much to charge above or below the current market price.

keeps taking an increasing share of market sales in its market.

sets its price based on the cost of inputs plus an allowance for profit.