Question 1

Barriers to entry in a perfectly competitive industry

Accepted Answer

A)  are nonexistent 
B)  are impossible to overcome 
C)  are possible to overcome, but more difficult an obstacle to entry than are barriers in monopolistic competition 
D)  result from patents and economies of scale 
E)  are essentially financial rather than technical 
A)  are nonexistent 
B)  are impossible to overcome 
C)  are possible to overcome, but more difficult an obstacle to entry than are barriers in monopolistic competition 
D)  result from patents and economies of scale 
E)  are essentially financial rather than technical

Question 2

In a perfectly competitive market, a firm that raises its price when its competitors do not

Accepted Answer

A)  must have a differentiated product 
B)  must have relatively high costs and therefore must raise price to compensate 
C)  sells no goods 
D)  gains market share 
E)  will become a monopolist eventually 
A)  must have a differentiated product 
B)  must have relatively high costs and therefore must raise price to compensate 
C)  sells no goods 
D)  gains market share 
E)  will become a monopolist eventually

Question 3

Advertising is used by firms to increase their price elasticities of demand.

Accepted Answer

A) True 
 B)False

Question 4

-In Exhibit J-3, which of the goods share a market with Good A? Explain your

Accepted Answer

Goods B and E share the market

Question 5

Your textbook uses steel, concrete, and aluminum to describe the nature of competition between industries. What is important about this example is that it helps distinguish between

Accepted Answer

A)  industries and markets 
B)  firms and industries 
C)  firms and markets 
D)  different construction technologies 
E)  factor markets for buildings 
A)  industries and markets 
B)  firms and industries 
C)  firms and markets 
D)  different construction technologies 
E)  factor markets for buildings

Question 6

When a producer's demand curve is a horizontal straight line, we know that

Accepted Answer

A)  market demand is horizontal as well 
B)  there is considerable brand loyalty for the producer's good 
C)  the producer is a monopolist 
D)  the producer has significant market share 
E)  the producer is in a perfectly competitive industry 
A)  market demand is horizontal as well 
B)  there is considerable brand loyalty for the producer's good 
C)  the producer is a monopolist 
D)  the producer has significant market share 
E)  the producer is in a perfectly competitive industry

Question 7

The spectrum of market structures, aligned from the least to the greatest number of firms, spans

Accepted Answer

A)  monopoly to duopoly 
B)  monopoly to oligopoly 
C)  monopoly to triopoly 
D)  monopoly to perfect competition 
E)  monopolistic competition to oligopoly 
A)  monopoly to duopoly 
B)  monopoly to oligopoly 
C)  monopoly to triopoly 
D)  monopoly to perfect competition 
E)  monopolistic competition to oligopoly

Question 8

-In Exhibit J-2, which of the following graphs of a firm's ATC best represent(s) a natural monopoly?

Accepted Answer

A)  I 
B)  II 
C)  III 
D)  I and II 
E)  I and III 
A)  I 
B)  II 
C)  III 
D)  I and II 
E)  I and III

Question 9

Think of the firms and industries that are familiar to you-how many firms in the industry, what their cost structures may look like-and decide which among them is least likely to be a natural monopoly.

Accepted Answer

A)  a professional football franchise in Toledo, Ohio 
B)  a pharmaceutical firm that produces a life-saving drug after 10 years of research investment 
C)  a public utilities firm, such as an electric power company 
D)  a high school in a small rural Kentucky town 
E)  an alternative rock band 
A)  a professional football franchise in Toledo, Ohio 
B)  a pharmaceutical firm that produces a life-saving drug after 10 years of research investment 
C)  a public utilities firm, such as an electric power company 
D)  a high school in a small rural Kentucky town 
E)  an alternative rock band

Question 10

When the charge against ALCOA for exercising monopoly control of the aluminum market was brought to court, ALCOA's market share, excluding scrap aluminum, was

Accepted Answer

A)  100 percent 
B)  90 percent 
C)  80 percent 
D)  65 percent 
E)  33 percent 
A)  100 percent 
B)  90 percent 
C)  80 percent 
D)  65 percent 
E)  33 percent

Question 11

Think about cost structures associated with each of the following and decide which is most likely not to be a natural monopoly.

Accepted Answer

A)  personal computer company 
B)  electric company 
C)  cable television company 
D)  water company 
E)  local telephone company 
A)  personal computer company 
B)  electric company 
C)  cable television company 
D)  water company 
E)  local telephone company

Question 12

Oligopoly and monopolistic competition can be described as industries where firms

Accepted Answer

A)  have high barriers to entry 
B)  produce identical goods 
C)  are located near each other 
D)  produce close substitutes 
E)  aspire to become perfect competitors 
A)  have high barriers to entry 
B)  produce identical goods 
C)  are located near each other 
D)  produce close substitutes 
E)  aspire to become perfect competitors

Question 13

If all the firms producing a good in an industry have market shares that are in significant,that is, close to zero percent of industry sales,

Accepted Answer

A)  they shut down, that is, go out of business in the long run 
B)  their output levels are close to zero as well 
C)  they are in a perfectly competitive market 
D)  profit is at best zero because cost must be at least greater than zero 
E)  they should advertise 
A)  they shut down, that is, go out of business in the long run 
B)  their output levels are close to zero as well 
C)  they are in a perfectly competitive market 
D)  profit is at best zero because cost must be at least greater than zero 
E)  they should advertise

Question 14

Diane Rae is a farmer in the perfectly competitive industry of sugar cane. She knows that she can sell more output than she currently does

Accepted Answer

A)  only by lowering the price of her sugar cane 
B)  only if she is able to drive out some of her competition 
C)  without affecting the market price 
D)  by raising the barriers to entry so that more of the market is left to those like herself who are already in the industry 
E)  only if she can develop a patent on sales 
A)  only by lowering the price of her sugar cane 
B)  only if she is able to drive out some of her competition 
C)  without affecting the market price 
D)  by raising the barriers to entry so that more of the market is left to those like herself who are already in the industry 
E)  only if she can develop a patent on sales

Question 15

The entry of new firms into a market will

Accepted Answer

A)  increase the market demand curve 
B)  make the existing firms' demand curves more elastic 
C)  make the market demand curve less elastic 
D)  shift the firm's demand curve to the right 
E)  shift the market supply to the right 
A)  increase the market demand curve 
B)  make the existing firms' demand curves more elastic 
C)  make the market demand curve less elastic 
D)  shift the firm's demand curve to the right 
E)  shift the market supply to the right

Question 16

Entry into an oligopoly is

Accepted Answer

A)  possible for anyone 
B)  time consuming 
C)  relatively easy 
D)  impossible 
E)  relatively difficult 
A)  possible for anyone 
B)  time consuming 
C)  relatively easy 
D)  impossible 
E)  relatively difficult

Question 17

Suppose Ford develops a technology enabling its full-size cars to get 150 miles per gallon. If it applies for a patent on that technology and is denied, Ford can expect to

Accepted Answer

A)  still have a monopoly on that technology because Ford has monopoly power in the industry 
B)  sell that technology to a competitor who will reapply for the patent 
C)  be reimbursed for its investment in research by the government because it was the government that denied the patent in the first place 
D)  earn lower profit than they would with the patent 
E)  sell fewer cars in the short run, but more in the long run than its competition 
A)  still have a monopoly on that technology because Ford has monopoly power in the industry 
B)  sell that technology to a competitor who will reapply for the patent 
C)  be reimbursed for its investment in research by the government because it was the government that denied the patent in the first place 
D)  earn lower profit than they would with the patent 
E)  sell fewer cars in the short run, but more in the long run than its competition

Question 18

The purpose of advertising is to shift the firm's demand to the right.

Accepted Answer

A) True 
 B)False

Question 19

We categorize market structures according to

Accepted Answer

A)  price, function, and size 
B)  number of firms, entry conditions, and substitutability of goods 
C)  entry conditions, location, and function 
D)  number of firms, location, and size 
E)  number of firms, entry conditions, and size 
A)  price, function, and size 
B)  number of firms, entry conditions, and substitutability of goods 
C)  entry conditions, location, and function 
D)  number of firms, location, and size 
E)  number of firms, entry conditions, and size

Question 20

Explain whether or not Ocean Spray cranberry juice, Sprite, Borden milk, Pepsi Lite, grape Kool-Aid, and Diet Dr. Pepper compete in the same market as Coca-Cola Classic.

Accepted Answer

It all depends on the cross elasticities

Exam 10: Identifying Markets and Market Structures

Barriers to entry in a perfectly competitive industry

In a perfectly competitive market, a firm that raises its price when its competitors do not

Advertising is used by firms to increase their price elasticities of demand.

-In Exhibit J-3, which of the goods share a market with Good A? Explain your

Your textbook uses steel, concrete, and aluminum to describe the nature of competition between industries. What is important about this example is that it helps distinguish between

When a producer's demand curve is a horizontal straight line, we know that

The spectrum of market structures, aligned from the least to the greatest number of firms, spans

-In Exhibit J-2, which of the following graphs of a firm's ATC best represent(s) a natural monopoly?

Think of the firms and industries that are familiar to you-how many firms in the industry, what their cost structures may look like-and decide which among them is least likely to be a natural monopoly.

When the charge against ALCOA for exercising monopoly control of the aluminum market was brought to court, ALCOA's market share, excluding scrap aluminum, was

Think about cost structures associated with each of the following and decide which is most likely not to be a natural monopoly.

Oligopoly and monopolistic competition can be described as industries where firms

If all the firms producing a good in an industry have market shares that are in significant,that is, close to zero percent of industry sales,

Diane Rae is a farmer in the perfectly competitive industry of sugar cane. She knows that she can sell more output than she currently does

The entry of new firms into a market will

Entry into an oligopoly is

Suppose Ford develops a technology enabling its full-size cars to get 150 miles per gallon. If it applies for a patent on that technology and is denied, Ford can expect to

The purpose of advertising is to shift the firm's demand to the right.

We categorize market structures according to

Explain whether or not Ocean Spray cranberry juice, Sprite, Borden milk, Pepsi Lite, grape Kool-Aid, and Diet Dr. Pepper compete in the same market as Coca-Cola Classic.

Introduction

Production Possibilities and Opportunity Costs

Demand and Supply

Elasticity

Happiness, Utility, and Consumer Choice

Price Ceilings and Price Floors

Entrepreneurship and Business Ownership

Costs of Production

Maximizing Profit

Price and Output in Monopoly, Monopolistic Competition, and Perfect Competition

Price and Output Determination Under Oligopoly

Antitrust and Regulation

Externalities, Market Failure, and Public Choice

Wage Rates in Competitive Labor Markets

Wages and Employment: Monopsony and Labor Unions

Interest, Rent, and Profit

Income Distribution and Poverty

International Trade

Exchange Rates, Balance of Payments, and International Debt

The Economic Problems of Less-Developed Economies

Filters