1. Which of the following is most likely to be an implicit cost for Company X?

• Forgone rent from the building owned and used by Company X
• Rental payments on IBM equipment
• Payments for raw materials purchased from Company Y
• Transportation costs paid to a nearby trucking firm

Question 2.The short run is characterized by

• plenty of time for firms to either enter or leave the industry.
• increasing, but not diminishing returns.
• fixed plant capacity.
• zero fixed costs.

Question 3. An industry comprised of 40 firms, none of which has more than 3% of the total market for a differentiated product is an example of

• monopolistic competition.
• oligopoly.
• pure monopoly.
• pure competition.

Question 4. Which of the following statements applies to a purely competitive producer?

• It will not advertise its product.
• In long-run equilibrium it will earn an economic profit.
• Its product will have a brand name.
• Its product is slightly different from those of its competitors.

Question 5. Which of the following best approximates a pure monopoly?

• The foreign exchange market
• The Kansas City wheat market
• The only bank in a small town
• The soft drink market

Question 6. Barriers to entering an industry

• encourage allocative efficiency.
• encourage productive efficiency.
• are the basis for monopoly.
• apply only to purely monopolistic industries.

Question 7. The restaurant, legal assistance, and clothing industries are each illustrations of

• countervailing power.
• homogeneous oligopoly.
• monopolistic competition.
• pure monopoly.

Question 8. Product variety is likely to be greater in

• monopolistic competition than in pure competition.
• pure competition than in monopolistic competition.
• homogenous oligopoly than in monopolistic competition.
• homogenous oligopoly than in differentiated oligopoly.

Question 9. Which of the following is the best example of oligopoly?

• Women's dress manufacturing
• Automobile manufacturing
• Restaurants
• Cotton farming

Question 10. An industry having a four-firm concentration ratio of 85%

• approximates pure competition.
• is monopolistically competitive.
• is a pure monopoly.
• is an oligopoly.

Question 11. What is the LAW OF DIMINISHING RETURNS, and why is this law considered a short-run phenomenon?

Question 12. Identify the primary characteristics of perfect competition and monopolistic competition. Give examples of each.