1. Which of the following industries comes closest to the model of perfect competition?
Automobile industry
Information technology industry
Aerospace industry
Agriculture
2. A feature of perfect competition is ________.
use of non-price competition by firms
mutual interdependence among firms
unique products
standardized products
3. Which of the following characteristics is most important in differentiating between perfect competition and all other types of markets?
Whether or not the product is standardized
Whether or not there is complete market information about price
Whether or not firms are price takers
All of the above are equally important.
4. Demand facing an individual, perfectly competitive firm is ________.
perfectly inelastic at the quantity the firm chooses to produce
perfectly inelastic at the quantity determined by market forces
perfectly elastic at the price the firm chooses to charge
perfectly elastic at the price determined by market forces
5. According to the shutdown rule, a firm should produce no output in the short run if ________.
the price is below minimum average total cost
the price is above minimum average total cost
the total revenues are lower than total fixed costs
the price is below minimum average variable costs
6. If a perfectly competitive firm incurs an economic loss, it should ________.
shut down immediately
try to raise its price
shut down in the long run
shut down if this loss exceeds fixed cost
7. A monopolist sells 100 units at $10 per unit and 90 units at $15 per unit. The marginal revenue from the tenth unit is ________.
$1000
$1350
$100
$350
8. Which of the following correctly completes this statement? The monopolist's marginal revenue will be ________.
greater than price
less than price
equal to price
greater than total revenues
9. When MR = MC, ________.
marginal profit is maximized
total profit is maximized
marginal profit is positive
total profit is zero
10. In the short run, a firm should shut down if it cannot ________.
make normal profits
make economic profits
cover its variable costs
cover its fixed costs
11. Which of the following industries is most likely to represent the monopolistic competition market structure?
Automobile
Tobacco
Restaurant
Farm equipment
12. Which of the following represents a good example of an oligopoly?
The agriculture industry
A public utility
The automobile industry
The restaurant industry
13. Mutual interdependence means that ________.
all firms are price takers
each firm sets its own price based on its anticipated reaction by its competitors
all firms collaborate to establish one price
all firms are free to enter or leave the market
14. The Herfindahl-Hirschman Index (HHI) is used to measure ________.
the degree of non-price competition
the degree of market concentration in an industry
the extent of price leadership
None of the above
15. The existence of a kinked demand curve under oligopoly conditions may result in ________.
price flexibility
price rigidity
competitive pricing
None of the above.
16. Porter's "Five Forces Model" is based on ________.
the laws of supply and demand
the law of diminishing returns
the Structure-Conduct-Performance model
the key factors affecting demand
17. In the long run, the most helpful action that a monopolistically competitive firm can take to maintain its economic profit is to ________.
continue its efforts to differentiate its product
raise its price
lower its price
do nothing, because it will inevitably experience a decline in profits
18. The demand curve, which assumes that competitors will follow price decreases but not price increases, is called ________.
an industry demand curve
an inelastic demand curve
a kinked demand curve
a competitive demand curve
19. The four-firm concentration ratio ________.
indicates the total profitability among the top four firms in an industry
is an indicator of the degree of monopolistic competition
indicates the presence and intensity of an oligopoly market
is used by the government as a basis for anti-trust cases
20. When a company is faced by a kinked demand curve, the marginal revenue curve will be ________.
upward sloping
horizontal
zero at the quantity produced
discontinuous