1. If there are 50 firms in a industry, each selling 2% of the total sales, the concentration ratio is:

a. 50%

b. 2% €

c. 100%

d. 8%

2. When Daimler Benz, maker of the Mercedes, bought Chrysler, the merger was

a. horizontal

b. vertical

c. conglomerate

Questions 3 through 10 involve the functions of the government in a world of laissez faire. The functions are the following:

A. Create and Enforce the "Rules"

B. Promote or Maintain Competition

C. Provide Information

D. Provide Public Goods

E. Reduce Negative Externalities (External Costs) through regulations or through taxes

F. Subsidize Positive Externalities (External Benefits)

G. Provide Merit Goods

H. Redistribute Income on the Basis of Need

For each of the following, choose the letter that best describes the function of government.

3. The government provides anti-trust laws.

4. The government subsidizes the building of new stadiums and arenas.

5. The government provides for military defense.

6. The government has a program of social security to provide a pension for the elderly.

7. The government requires that all gasoline stations post their prices in signs large enough to be seen by a reasonable person from the street.

8. The government requires people to have a smog control device in their cars.

9. The government makes the beach free for everyone

10. The government makes laws that determine certain behaviors that a corporation must engage in and other behaviors that a corporation cannot engage in.