Chapter 4 Economics Review
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Several corn farmers in Iowa meet with
their friends each week for breakfast.
They talk about their families and about
the weather. But soon they engage in
more serious discussions about the future demand for corn, the latest prices
being offered for their crop, and the cost
of their seeds, fertilizer, and machinery.
Which characteristic of a purely competitive market BEST fits the scene described above?
A. Many sellers participate in the market.
B. Sellers offer identical products.
C. Buyers and sellers are well informed
about products.
D. Sellers are able to enter and exit the
market easily.
Buyers and sellers are well informed
about products.
What type of market structure is shown
here?
A. pure competition
B. monopoly
C. monopolistic competition
D. oligopoly
pure competition
3. What characteristic of a purely competitive market does crude oil have?
A. The product has no substitutes that
are close to it in price.
B. The product has an unlimited number The product is the same no matter who
of sellers.
produces it.
C. The product is always packaged in the
same way.
D. The product is the same no matter
who produces it.
What is likely to be the MAIN barrier to
entry into the business shown here?
A. lack of government regulation
B. limited consumer demand
complex technology
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C. high cost of advertising
D. complex technology
Which of the following industries is most
likely to exist in a purely competitive market?
A. shoes
B. wheat
C. bottled water
D. personal computers
wheat
In the market represented in the graph
above, if one of the firms doubled its
output, what would happen to the price?
A. The price would rise to meet the new
demand.
B. The price would fall to eliminate the
surplus.
C. The price would rise at first and then
fall.
D. The price would remain the same.
The price would remain the same.
Which of the following is an example of
a natural monopoly?
A. an automobile manufacturer
B. a supermarket chain
C. a subway system
D. a construction company
a subway system
The main advantage of firms with
economies of scale is that
A. no matter how high their output rises,
their average cost continues to fall.
B. because of their greater level of effi- no matter how high their output rises,
ciency, they have lower start-up costs.
their average cost continues to fall.
C. their average cost will begin to rise
only after they reach maximum output.
D. they can alter the price for their product as the cost of production changes.
This business operates in Grand Teton
National Park. It MOST LIKELY has been
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granted
A. a patent.
B. a league.
C. a franchise.
D. an exemption.
a franchise.
This company has a monopoly on the
service it provides because
A. it is a technological monopoly; no other company has the technology necessary to provide this service.
B. it is a patent monopoly; the governit is a natural monopoly; it would not be
ment has given the company exclusive
efficient for more than one company to
rights to provide this service.
provide this service.
C. it is an industrial monopoly; it bought
out all of its competitors that previously
provided this service.
D. it is a natural monopoly; it would not
be efficient for more than one company
to provide this service.
Drug companies have a monopoly on
many brand-name prescription drugs.
What does this graph indicate about
drug companies' economic decisions
during the period shown?
A. They chose to limit output and charge
They chose to limit output and charge
more for their products.
more for their products.
B. They chose to increase output and
charge less for their products.
C. They chose to limit output and charge
less for their products.
D. They chose to increase output and
charge more for their products.
Why does it make sense for theaters,
museums, restaurants, and other facilities to offer discounts to senior citizens?
A. Senior citizens usually bring other
people with them who will pay full price.
B. Many senior citizens would not visit
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the facility if they had to pay full price.
C. These facilities usually have membership quotas for visitors of different ages
Many senior citizens would not visit the
and classes.
facility if they had to pay full price.
D. Senior citizens are more likely than
younger people to spend additional
money during their visit.
Why is the company that makes these
jeans considered both monopolistic and
competitive?
A. It has a monopoly on this color, but
it must compete with those who make
jeans in other colors.
B. It has a monopoly on its own design, It has a monopoly on its own design,
but it must compete with other makers of but it must compete with other makers of
jeans.
jeans.
C. Its low price gives it a monopoly, but
it must compete with makers of higher-priced jeans.
D. Its high price gives it a monopoly,
but it must compete with makers of lower-priced jeans.
Which of these factors causes a monopolistically competitive firm to have little
control over the price of its product?
A. the influence of government price
supports
B. the general weakness of the currency
C. the ready availability of substitutes
D. the low marginal cost of production
the ready availability of substitutes
By being close to the airport, the owner
of the business this sign points toward is
engaging in a type of
A. commodity marketing.
B. economies of scale.
C. market power.
D. non-price competition.
non-price competition.
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Which characteristic of non-price discrimination is most likely the reason why
people choose to buy this watch?
A. physical characteristics
B. status or image
C. location
D. level of service
status or image
What kind of market structure does this
pie graph illustrate?
A. perfect competition
B. monopoly
C. monopolistic competition
D. oligopoly
oligopoly
Which two market structures have relatively high barriers to entry?
A. pure competition and monopolistic
competition
B. monopolistic competition and oligopoly
C. oligopoly and monopoly
D. monopoly and monopolistic competition
oligopoly and monopoly
"OPEC Disagreement Could Lead to
Lower Gas Prices"
Based on this headline, the writer is
LIKELY predicting that one or more
members of the OPEC cartel plan to
A. decrease production.
B. increase production.
C. end production.
D. engage in collusion.
increase production.
Why did the cartoonist characterize
Standard Oil as a kind of monster?
A. The company engaged in environmentally destructive practices that left
many areas in ruins.
B. The company reacted to antitrust laws
by attacking and destroying government
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buildings.
C. The company took over other busiThe company took over other businessnesses and exerted undue influence
es and exerted undue influence over
over politicians.
politicians.
D. The company refused to comply with
government antitrust regulations.
What was the main goal of the federal
actions shown on this timeline?
A. to ensure economic competition
B. to support the best U.S. companies
C. to limit the expansion of companies
D. to maintain control of the economy
to ensure economic competition
Which of the following BEST summarizes the change in browser usage between 2000 and 2013?
A. Netscape's browser continued to be
Internet Explorer's main competitor.
Microsoft no longer had a near-monopB. Firefox's browser dominated the mar- oly in the browser market.
ket after 2000. C. Microsoft no longer had
a near-monopoly in the browser market.
D. Microsoft won the antitrust lawsuit
brought by the government.
23. In 1992, the Justice Department and
the FTC released guidelines for proposed mergers. The basic theme of the
guidelines was that "mergers should not
be permitted to create or enhance market power."
Read the excerpt from the text. Why
to gain more control over prices and total
might a firm, through a merger, seek to
market output
increase market power?
A. to come closer to achieving pure competition in its market
B. to gain more control over prices and
total market output
C. to maintain a strong barrier to entering
its market
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D. to force competitors to seek their own
mergers
California deregulated its wholesale
electricity market in 1996. Which of the
following BEST summarizes the data in
this graph?
A. After deregulation, California's electricity rates rose sharply and then
After deregulation, California's electricity
dropped.
rates were higher than the national averB. After deregulation, U.S. electricity
age.
rates rose steadily, except for two years.
C. After deregulation, California's electricity rates dropped significantly.
D. After deregulation, California's electricity rates were higher than the national
average.
Each letter represents one of the four
types of market structure. Where on this
continuum would oligopoly be located?
A. a
B. b
C. c
D. d
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c