Question 1

Under oligopoly there are

Accepted Answer

A)  identical products.
B)  high barriers to entry.
C)  low barriers to entry.
D)  so many firms that no one can control the price. B

Question 2

For a market to be characterized by perfect competition, there must be

Accepted Answer

A)  a large number of firms with no one able to influence price.
B)  freedom of entry and exit.
C)  indistinguishable products being sold.
D)  all of the options are correct. D

Question 3

If there are two airlines selling service between city A and city B the best model to analyze this market is

Accepted Answer

A)  perfect competition.
B)  monopolistic competition.
C)  monopoly.
D)  oligopoly. C

Question 4

An industry which has a 4-firm concentration ratio near 20 would best be described as

Accepted Answer

A)  perfect competition.
B)  monopolistic competition.
C)  oligopoly.
D)  monopoly.

Question 5

-In Figure 5.7, assuming perfect competition and at MR1 there will be

Accepted Answer

A)  short run pressure on the price to rise.
B)  long run pressure on the price to rise.
C)  no pressure on the price to change.
D)  short and long run pressure on the price to rise.

Question 6

There are hundreds of local water companies but economists insist that in each community they are __________ because consumers have no other choices in the local market in which they live.

Accepted Answer

A)  perfect competition
B)  monopolistic competition
C)  oligopoly
D)  monopoly

Question 7

-In Figure 5.1, what profit would a perfect competitor earn?

Accepted Answer

A)  a profit of zero
B)  a positive profit
C)  a loss less than its total fixed cost
D)  a loss greater than its total fixed cost

Question 8

-In Figure 5.5, a monopolist would charge which price?

Accepted Answer

A)  P1
B)  P2
C)  P3
D)  P4

Question 9

Normal Profit is what a firm

Accepted Answer

A)  usually makes.
B)  needs to make to maintain the incentive to remain in the industry.
C)  is zero in the long run.
D)   A and b

Question 10

In Figure 5.8, if the supply curve moves from S2 to S4

Accepted Answer

A)  The firm will make a smaller economic profit than they used to
B)  The firm will go from making an economic profit to a normal profit
C)  The firm will go from making an economic profit to a loss but one that is not big enough to make it want to shutdown.
D)  The firm will go from making an economic profit to a loss that is big enough to make it want to shutdown.

Question 11

Very low four-firm concentration ratios characterize the

Accepted Answer

A)  breakfast cereal industry
B)  beer industry
C)  furniture industry
D)  cellular telephone service industry

Question 12

Figure 5.4
-In Figure 5.4, a monopolist would charge which price?

Accepted Answer

A)  P1
B)  P2
C)  P3
D)  P4

Question 13

The firm's supply curve is made up of the

Accepted Answer

A)  Points where MC=MR
B)  Points where MC=MR and they make a profit
C)  Points where MC=MR and they make at least breakeven
D)  Points where MC=MR above the minimum of AVC

Question 14

For a market to be characterized by monopoly, there must be

Accepted Answer

A)  a large number of firms with no one able to influence price.
B)  freedom of entry and exit.
C)  indistinguishable products being sold.
D)  a single seller

Question 15

The assumption under perfect competition of a firm that has no market power means that

Accepted Answer

A)  firms are free to leave the market any time and there is no power keeping them there.
B)  the good one firm produces is very different than the good another produces.
C)  the good one firm produces is exactly then same as the good another firm produces.
D)  that no buyer will pay more for one firm's good than another's.

Question 16

When there are significant barriers to entry and there are few firms in the industry

Accepted Answer

A)  economic profit will continue for the firms in the industry.
B)  economic profit will go to zero.
C)  normal profit will be garnered by the firms.
D)  at least one will exit until the economic profit disappears.

Question 17

There are one-half million grain farmers in the country producing corn. The best model to analyze this market is

Accepted Answer

A)  perfect competition.
B)  monopolistic competition.
C)  oligopoly.
D)  monopoly.

Question 18

There will be short-run pressure on the price to rise whenever

Accepted Answer

A)  P>ATC.
B)  P=ATC.
C)  P<ATC.
D)  P<AVC.

Question 19

A reduction in the market price of the product is most likely to be required to enable

Accepted Answer

A)  a single Northwestern logging company to sell a larger quantity of timber.
B)  a single Midwestern grain farmer to sell a larger harvest of grain.
C)  a single Pacific Coast fishing trawler to sell a larger quantity of tuna
D)  Apple to sell more of its iPhones.

Question 20

Microsoft is a dominant producer of operating system software for personal computers because

Accepted Answer

A)  its Windows product was one of the first to appear in the market.
B)  Linux and OS2 were unstable and vulnerable to frequent security failures.
C)  the U.S. Justice Department has always encouraged Microsoft to dominate its market.
D)  all of the above.

Exam 5: Perfect Competition, Monopoly, and Economic Versus Normal Profit