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1 | |
What do economists call the degree of control that a single firm or small number of firms has over the price and production decisions in an industry? |
| | A) | monopolistic competition |
| | B) | monopoly |
| | C) | industry control |
| | D) | market power |
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2 | |
The four-firm concentration ratio is: |
| | A) | the percent of total industry production that is accounted for by the largest four firms. |
| | B) | the percent of total cost that is associated with the largest four firms. |
| | C) | the percent of total industry production that is accounted for by the smallest four firms. |
| | D) | the percent of total cost that is associated with the smallest four firms. |
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3 | |
The Herfindahl-Hirschman Index (HHI) is calculated by: |
| | A) | summing the squared residuals in a regression of production on costs. |
| | B) | summing the squares of the percentage market shares of the four largest producers in the market. |
| | C) | summing the squares of the percentage market shares of all the participants in an industry. |
| | D) | summing the squares of the percentage market shares of the four smallest producers in the market. |
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4 | |
A market that exhibits perfect competition will have a Herfindahl-Hirschman Index equal to _______. A monopoly will have a Herfindahl-Hirschman Index equal to _______. |
| | A) | 10,000; 0 |
| | B) | 0; 10,000 |
| | C) | 1000; 100 |
| | D) | 100; 1000 |
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5 | |
Strategic interaction refers to the situation where: |
| | A) | each firm's business depends upon the behavior of its rivals. |
| | B) | all firms are monopolies. |
| | C) | perfect competition prevails despite extensive barriers to entry. |
| | D) | none of the above. |
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6 | |
Imperfect competition generally leads to: |
| | A) | P=MC. |
| | B) | poor quality and high prices. |
| | C) | high prices, but better quality than under perfect competition. |
| | D) | all of the above. |
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7 | |
What do economists call the situation where two or more firms set their prices and output according to a plan agreed upon between them in order to divide the market amongst themselves? |
| | A) | strategic interaction |
| | B) | monopolistic competition |
| | C) | oligopoly |
| | D) | collusion |
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8 | |
Cartels are: |
| | A) | organizations of independent firms, producing similar products, that work together to raise prices and restrict output. |
| | B) | for the most part illegal in the United States. |
| | C) | oligopolies. |
| | D) | all of the above. |
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9 | |
When oligopolists collude, they are able to: |
| | A) | raise price, but not restrict output. |
| | B) | raise price and restrict output, but not attain the monopoly profit. |
| | C) | raise price and restrict output, and therefore attain the monopoly profit. |
| | D) | restrict output, but not raise price. |
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10 | |
Monopolistic competition resembles perfect competition in which of the following ways? |
| | A) | Firms take other firms' prices as given. |
| | B) | There are many firms in the industry. |
| | C) | Entry and exit to and from the market are easy. |
| | D) | All of the above. |
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11 | |
Which of the following is the only difference between monopolistic competition and perfect competition? |
| | A) | Under perfect competition, firms produce where MC=MR, but under monopolistic competition, firms produce where AC=MR. |
| | B) | Under perfect competition, firms sell a homogeneous product, but under monopolistic competition, firms sell differentiated products. |
| | C) | Under perfect competition, there are fewer firms than under monopolistic competition. |
| | D) | None of the above. |
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12 | |
In the long-run, under monopolistic competition, prices are ______ marginal costs, but economic profits are _______. |
| | A) | above; positive |
| | B) | below; positive |
| | C) | above; zero |
| | D) | below; zero |
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13 | |
Price discrimination will: |
| | A) | lead to higher profits. |
| | B) | occur when the same product is sold to different buyers at different prices. |
| | C) | result in firms charging the same price to all consumers. |
| | D) | a and b |
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14 | |
When firms cannot capture the full monetary value of their inventions, we call that: |
| | A) | monopolistic competition. |
| | B) | collusion. |
| | C) | inappropriability. |
| | D) | strategic interaction. |
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15 | |
Which of the following create monopolies and property rights in order to encourage research, development, and innovation? |
| | A) | patents |
| | B) | copyrights |
| | C) | tariffs |
| | D) | a and b |
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16 | |
_______ are the losses in real income associated with monopolies, tariffs and quotas, taxes, and other distortions. |
| | A) | Deadweight losses |
| | B) | Economic losses |
| | C) | Monopolistic losses |
| | D) | Distorting losses |
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