EBC 101 / ECO 1: Introductory Economics Module Test Ill Name: DLC: Score: Multiple Choice. 1 . Which of the following statements characteristics perfect competition? a. Producers are price makers. b. Producers sell differentiated products. Producers enjoy complete freedom of entry into and exit from the industry. d. Consumers are price makers. e. All of the above statements characterize perfect competition. 2. The pure monopolist a. sells a homogeneous product is the sole seller of a product for which there are no close substitutes c. faces a perfectly elastic demand curve d. is a sole proprietor e. is a price-taker. 3. A monopolistic competitor a sells a differentiated product b. never advertises c. is faced with a perfectly elastic demand curve d. enjoys complete freedom of entry into and exit from the industry e. does all of the above 4. An oligopoly a. sells only a differentiated product b. must consider how competitors are pricing their products when deciding what price to charge. c. is the only seller of a product d. is a market structure consisting of thousands of sellers. e. is none of the above. 14949. A monopoly may produce more efficiency than the same industry in competitive form because a. there may be economies of scale that would not be achieved by a number of small firms b. monopolies typically have better management c. a monopoly does not have to worry about what its rival may do d. a monopoly can concentrate on production rather than profits. 50. The original philosophy of regulating natural monopolies like public utilities a. was to guarantee the consumer of low price b. involved government ownership of necessary enterprises. c. was to achieve the advantages of large-scale production but prevent the monopolist from raising price and restriction output d. has been implemented with little difficulty over the years.5. Which of the following firms will maximize profits (or minimize losses) where marginal revenue equals marginal cost? a. a monopoly b. a perfectly competitive firm c. an oligopoly d. a monopolistically competitive firm e. all of the above 6. Which of the following is a price taker? a. a monopoly b. an oligopoly c. a monopolistically competitive firm d. a perfectly competitive firm e. all of the above 7. Which of the following is characterized by price interdependence? a. a monopoly b. an oligopoly c. a monopolistically competitive firm d. a perfectly competitive firm e. all of the above 8 . Which of the following firms faces a perfectly elastic demand curve? a. a perfectly competitive firm b. a monopolistically competitive firm c. an oligopoly d. a monopoly e. all of the above 9 . In the short-run, which of the following firms should attempt to produce where average total costs are at a minimum in order to maximize profits to minimize losses? a. a perfectly competitive firm b. a monopolistically competitive firm c. an oligopoly d. a monopoly e. none of the above 10. If the price is less than the average total cost for a perfectly competitive firm in the short-run, then the firm a. is earning an economic profit. b. should continue to operate as long as price is above the average 150pleted variable cost c. should shut down d. should continue to operate as long as price is above the average fixed cost e. is breaking even 11. If a firm shuts down in the short-run, its cost will equal its a. average total cost b. total cost c. variable cost @ fixed cost e. average fixed cost 12. The general rule when a perfectly competitive firm should shut down in the short run is when price is a. below the minimum of average variable cost b. below the minimum of average total cost c. below the minimum of average fixed cost d. above the average variable cost but below the average total cost e. none of the above 13. In the long run, if a perfectly competitive industry has some firms suffering losses, we can expect a. the market supply curve to shift to the left b. those firms losing money to leave the industry c. the market price to rise d. losses in the industry to disappear e. all of the above 14. If a firm in a perfectly competitive industry takes advantage of economies of scale and expands its production facilities, then a. we must be in the long run because plant size is not fixed. b. its cost curves will shift down, enabling it to earn a greater profit, at least for a little while. c. other firms will be forced to do the same to survive. d. the market price is decreased because of greater output finding its way to the market. e. all of the above. 15. Which of the following is true of the pure monopolist? a. The demand curve facing the product is the market demand curve b. Producers sell a product for which there are many substitutes. c. Producers are price takers. 151d. Producers always charge the highest possible price. e. Producers enjoy complete freedom of entry into and out of the industry. 16. Which of the following firms cannot make an economic profit in the long run? a. the monopoly b. the oligopoly c. the monopolistically competitive firm d. the perfectly competitive firm e. They can all make an economic profit in the long run. 17. If a perfectly competitive firm is losing money in the short run, then a. it should shut down b. it should shut down only if its losses are greater than its fixed costs. c. it should shut down only if price is smaller than average variable cost. d. it should never shut down in the short run e. this is because price is equal to average total cost. 18. Some competitive firms operate at a loss in the short run because a. they do not attempt to maximize profits or minimize losses b. their revenues are at least able to cover their sunk costs. c. their revenues are not able to cover out-of-pocket costs. d. price is above average total cost. e. price is below average variable cost. 19. A monopoly has the ability to a. control price in the market b. control output in the market c. control its profits d. keep competitors from entering the market e. do all of the above 20. Monopolies as opposed to purely competitive forms a. charge a lower price. b. produce a greater output level because of economies of scale c. restrict entry into the market d. can earn economic profits only in the long run because of research and development expenses e. are characterized by all of the above. 21. Barriers to entry associated with a monopoly might include a. business taxes b. import quotas 152c. state or federal license to operate d. ownership rights to a well-known brand name with very loyal customers e. managerial skills 22. Which of the following is true of a pure monopoly? a. Its market power enables it to charge whatever price it wishes b. The barriers to entry are insurmountable c. It may have become the only seller of a product because it was the first to sell it d. The consequences of a monopoly always limit consumer welfare e. It is a price-taker. 23. The monopoly a. may produce in the range of diseconomies of scale. b. will always produce where price equals marginal cost in the long run. c. will produce where marginal benefits equal marginal cost. d. will maximize profit by producing where price equals marginal cost. e. will maximize consumer welfare. 24. A monopolist who price-discriminate is attempting to a. sell the product at the cheapest possible price. b. sell the product at marginal cost. c. sell the greatest possible number of products. d. charge the highest possible price it can receive e. sell the product at buyer's marginal cost 25. An imperfectly price-discriminating monopolist will charge a higher price in the market that has a. a more inelastic demand b. a more elastic demand c. fewer customers d. highest costs e. none of the above 26. The results of monopoly power include a. higher prices b. greater production c. a more socially desirable redistribution of income d. the minimization of production costs, hence an efficient employment of resources e. all of the above 15327. Monopolies arise because a. competitive firms fail to produce quality products b. diseconomies of scale may require one very large producer to minimize long-run average costs c. there are many substitute products @. of barriers to entry that prohibit competitors from entering the industry e. of all the above 28. A monopoly's marginal revenue a. increases as more units are sold b. decreases as more units are sold c. is constant as more units are sold d. curve is a horizontal line e. curve is controlled by the monopoly 29. A monopoly's marginal revenue is always less than price xcept for the first unit sold because a. the monopoly is less efficient than a competitive firm b. as price rises, total revenue rises c. the monopoly must reduce price to sell more d. the monopoly is a price taker e. the monopoly is faced with an upward-sloping demand curve 30. A monopoly can incur losses a. if demand is relatively weak and costs are relatively high. b. only in the short run c. in the short run to discourage a potential competitor from entering the market or to bankrupt a new competitor d. for all of the above reasons e. for none of the above reasons. 31. A monopoly, as opposed to a competitive industry, will a. produce less, charge a higher price, and use fewer resources b. produce more, charge a higher price, and use more resources c. produce more, charge a lower price, and use more resources d. produce less, charge a lower price, and use more resources e. maximize consumer welfare 32. Imperfect price discrimination a. doesn't attempt to charge each customer the highest possible price. b. results in only a few different prices c. requires the monopoly to be able to segment markets or to differentiate 154consumer's consumption levels d. is fairly common e. is all of the above. 33. The more elastic the monopolistic competitor's demand curve is, the a. fewer the number of competitors b. easier it is for firms to enter the market and duplicate the product c. greater the difficulty in duplicating the product d. lower the public's awareness of price differences e. none of the above 34. The monopolistic competitor will charge a price a. above that of a purely competitive firm but will produce more b. below that of a monopolist firm will produce more c. equal that of a monopolist but will produce at the output level of a purely competitive firm d. to maximize sales e. where economic profits are zero in the short run 35. Which of the following statements about the monopolistically competitive industry in the long run is true? a. Its output level is less than capacity b. Its price is above that for a perfectly competitive firm c. Consumers have a greater variety of products to choose from d. All of the above statements are true e. None of the above statements are true 36. Barriers to entry to the monopolistically competitive industry a. don't exist b. are greater than those to purely competitive industries but less than those to monopolies or oligopolies c. are primarily based upon prices d. are less than those to competitive industries but greater than those to monopolies or oligopolies e. enable these firms to earn substantial economic profits in the long run. 37. In the long run, the output level of a monopolistic competitor a. occurs at the minimum of average total cost b. is greater than that of the purely competitive firm c. is less than that of monopolies or oligopolies d. is the same as that of the perfectly competitive firm e. is none of the above 15538. The kinked demand curve facing an oligopoly is based on the assumption that a competitors will follow in a price reduction but not in a price increase. b. competitors will follow in a price increase but not in a price reduction. c. a price increase will result in a smaller percentage decrease in the quality demanded d. a price decrease will result in a greater percentage decrease in the quality demanded e. a and c 39. A cartel is a. explicit collusion b. implicit collusion c. a vertical merger d. a horizontal merger e. a and d 40. An exclusive dealership is a. an agreement between a manufacturer and its dealers that forbids the dealers from handling any other manufacturer's products. b. an agreement between a manufacturer and its dealers that requires the dealers to purchase some other good or service c. the only dealership within some geographical area, which therefore acts as a monopoly d. a dealership that differentiates its product with "snob appeal." e. a vertical merger. 41. An oligopolistic industry a. may be a duopoly b. may sell a differentiated or homogeneous product c. is characterized by few dominant firms with substantial entry barriers. d. may advertise extensively e. is characterized by all of the above 42. An oligopoly may price its product a. as would a monopoly b. as a price leader if it is a big producer c. at the kink in its demand curve d. all of the above e. none of the aboveste 43. The kinked demand curve facing an oligopolist a. is elastic in the upper portion but inelastic in the lower portion b. is inelastic in the upper portion but elastic in the lower portion c. is discontinuous d. is upward sloping in the upper portion and downward sloping in the lower portion e. none of the above 44. The kinked demand curve facing an oligopolist assumes a. that a price increase will decrease total revenue b. that a price decrease will decrease total revenue c. that competitors will follow a price reduction d. that competitors will not follow a price increase. e. all of the above 45. The automobile industry would be described by economists as a. a monopoly b. an oligopoly c. a purely competitive industry d. a monopolistically competitive industry e. a horizontal merger 46. Classical economists preferred perfect competition to monopoly because it fulfilled all but which one of the following basic goals? a. consumer sovereignty b. dispersion of economic power c. virtual equality in income distribution d. efficiency of resource allocation 47. As far as it affects consumer welfare, monopoly is potentially objectionable because a. price = marginal revenue b. price > marginal cost c. marginal cost = marginal revenue d. marginal revenue > marginal cost 48. In order to have the consumer pay for the last unit just what it cost to produce the last unit. a. price should equal average cost b. average cost must be at a minimum c. marginal cost should equal price d. marginal revenue should equal price 157