How a monopoly firm is different from a competitive firm

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Reference no: EM13185458

1) A significant difference between monopoly and perfect competition is that

A. free entry and exit is possible in a monopolized industry, but impossible in a competitive industry

B. competitive firms control market supply, but monopolies do not

C. the monopolist's demand curve is the industry demand curve, while the competitive firm's demand curve is perfectly elastic

D. profits are driven to zero in a monopolized industry, but may be positive in a competitive industry.

2) A monopoly firm is different from a competitive firm in that

A. there are many substitutes for a monopolist's product while there are no substitutes for a competitive firm's product

B. a monopolist's demand curve is perfectly inelastic while a competitive firm's demand curve is perfectly elastic

C. a monopolist can influence market price while a competitive firm cannot

D. a competitive firm has a U-shaped average cost curve while a monopolist does not

3) The difference between a perfectly competitive firm and a monopolistically competitive firm is that a monopolistically competitive firm faces a

A. horizontal demand curve and price equals marginal cost in equilibrium

B. horizontal demand curve and price exceeds marginal cost in equilibrium

C. downward-sloping demand curve and price equals marginal cost in equilibrium

D. downward-sloping demand curve and price exceeds marginal cost in equilibrium

4) As long as marginal cost is below marginal revenue, a perfectly competitive firm should

A. increase production

B. hold production constant

C. decrease production

D. reconsider past production decisions

5) Because a monopolistic competitor has some monopoly power, advertising to increase that monopoly power makes sense as long as the marginal

A. benefit of advertising is positive

B. cost of advertising is positive

C. benefit of advertising exceeds the marginal cost of advertising

D. cost of advertising exceeds the marginal benefit of advertising

6) In the Flint Hills area of Kansas, proposals to build wind turbines to generate electricity have pitted environmentalist against environmentalist. Members of the Kansas Sierra Club support the turbines as a way to reduce fossil fuel usage, while local chapters of the Nature Conservancy say they will befoul the landscape. The Sierra Club argues that wind turbines

A. are a source of negative externalities

B. reduce negative externalities elsewhere in the economy

C. create a free-rider problem

D. are a way of solving a free-rider problem

7) When negative externalities are present, market failure often occurs because

A. the marginal external cost resulting from the activity is not reflected in the market price

B. the marginal external cost resulting from the activity is reflected in the market price

C. the existence of imports from foreign countries takes jobs and income away from U.S. citizens

D. consumers will consume the good at a level where their individual marginal benefits exceed the marginal costs borne by the firm producing the good

8) A merger between a textile mill and a clothing manufacturing company would be considered a

A. horizontal merger

B. vertical merger

C. conglomerate merger

D. diagonal merger

9) A merger between a baby food company and a life insurance company would be considered a

A. horizontal merger

B. vertical merger

C. conglomerate merger

D. diagonal merger

10) From the point of view of consumer and producer surplus, what problem may be created when a country subsidizes the cost of energy to consumers to help alleviate the burden of higher energy costs?

A. It hurts the poor and benefits the rich.

B. It leads to less fuel being used than the amount that maximizes consumer surplus.

C. It encourages the consumption of too much fuel at the expense of other goods.

D. It has no effect; consumers gain a surplus, but taxpayers lose the same amount because they must finance the subsidy.

11) Suppose people freely choose to spend 40 percent of their income on health care, but the government decides to tax 40 percent of a person's income to provide the same level of coverage as before. What can be said about deadweight loss in each case?

A. Taxing income results in deadweight loss, while purchasing health care on one's own does not result in deadweight loss.

B. Taxing income results in less deadweight loss, because government knows better what health care coverage is good for society.

C. There is no difference because the goods are purchased in the market in either case.

D. There is no difference because the total spending remains the same and the health care purchased remains the same.

12) The U.S. textile industry is relatively small because the US imports most of its clothing. A clear result of the importation of clothing is

A. there is less variety available than there would be without imports

B. the quality of clothing is lower than it would be without imports

C. the price of clothing is higher than it would be without imports

D. the price of clothing is lower than it would be without imports

13) Countries can expect to gain from international trade as long as they

A. keep production diversified

B. specialize according to their comparative advantage

C. produce only those goods for which they have a relatively high opportunity cost

D. use trade restrictions to reduce competition for domestic producers

14) Which of the following is an example of the law of one price?

A. Exchange rates tend to have equivalent values. For example, one Italian lire equals one U.S. dollar.

B. Because people have essentially the same basic needs wherever they live, they tend to buy the same bundle of goods.

C. Because wages are so much lower in China, eventually all U.S. jobs will be outsourced to China, leaving the US to import all goods at one price.

D. Because their countries have similar institutions, the price paid for a computer in Germany and the United States are about the same when converted into the same currency.

15) The fact that U.S. managers' salaries are substantially greater than those of comparable managers in Japan may be related to

A. an increase in the demand for CEOs

B. an increase in the supply of CEOs

C. the comparatively greater competitive markets in Japan

D. the greater number of public goods provided in the United States

Reference no: EM13185458

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