Economics Chapter 7

Which of the following is an accurate statement? a. Market allocation is illegal because it helps a business make a profit. b. Market allocation is illegal because it reduces competition. c. Market allocation is illegal because it is based on price-sensitivity. d. Market allocation is illegal because it is caused by elasticity of demand.

Market allocation is illegal because it reduces competition.

Which of the following is an example of nonprice competition? a. a toy store raising the price of a popular stuffed animal b. a car dealer advertising the low price of their used cars c. a department store lowering the price of their sweaters d. a cell phone company giving away phones for free

a cell phone company giving away phones for free

Which of the following probably has the highest start-up costs? a. a restaurant belonging to a fast-food chain b. a feature-length motion picture production by a major studio c. a bookstore that specializes in travel books d. a theatrical production by a local theater group

a feature-length motion picture production by a major studio

Which of the following might be a barrier to entry for a lumber company? a. the development of a more efficient electric saw b. a competitor going bankrupt because of mismanagement c. a government restriction on logging d. a rise in the popularity of furniture made of maple

a government restriction on logging

Which of the following always causes a deviation from perfect competition? a. a government subsidy b. a large number of sellers c. a standardized product d. a large number of buyers

a government subsidy

Which of the following businesses could easily exit a market? a. a diamond mine b. a hot dog restaurant c. an oil refinery d. a breakfast cereal company

a hot dog restaurant

Which of the following is an example of antitrust legislation? a. a law that breaks up an oil monopoly b. a law that approves a subsidy for drug research c. a law that prevents price fixing in the CD industry d. a law that requires a construction firm to stop predatory pricing

a law that breaks up an oil monopoly

Which of the following will the FTC probably support? a. a merger that makes entering a market more difficult b. a merger that lowers competition in an industry c. a merger that leads to greater market concentration d. a merger that leads to lower prices for consumers

a merger that leads to lower prices for consumers

Which of the following often gets more efficient because of economies of scale?

a public utility

A remote gas station in a wilderness area probably has a

geographic monopoly

The only gas station within a radius of 200 miles has a

geographic monopoly

Monopolists are able to control prices because they have

no competition and there are no close substitutes for their products

By controlling supply monopolists can control

price

In a market economy with imperfect competition sellers

sometimes join with other sellers to influence prices

Which of the following is an example of a geographic monopoly? a. a store in Phoenix that sells only music boxes b. the only gas station in a radius of one mile c. a store in Chicago that sells only leather goods d. the only restaurant in a radius of 200 miles

the only restaurant in a radius of 200 miles

Few sellers and many buyers is characteristic of

an oligopoly

An oligopolist sells

either standardized or differentiated products

How do monopolistic competitors make consumers aware of product differences?

by using advertising and marketing

An example of imperfect competition is when

cattle ranchers join together to influence the price of beef

The Jones family sells peaches at market price. Which of the following explains why they do this? a. many buyers and many sellers in their market b. few buyers and few sellers in their market c. few buyers and many sellers in their market d. many buyers and few sellers in their market

many buyers and many sellers in their market

A chain of restaurants that specializes in roast beef sandwiches participates in

monopolistic competition

A company that has a patent on a particular product has a

technological monopoly

A drug company with a patent on a drug has a

technological monopoly

Which of the following slogans use customer loyalty to sell its product? a. You know these hamburgers are good, they're Wendy's. b. Wendy's Hamburgers, a new type of burger c. Treat yourself to the best burgers, eat at Wendy's d. Get the most for your money, eat Wendy's Hamburgers.

You know these hamburgers are good, they're Wendy's.

Some examples of standardized products include a. furniture products, such as chairs and tables b. clothing products, such as shirts and jeans c. agricultural products, such as eggs and milk d. electronic products, such as DVD players and TVs

agricultural products, such as eggs and milk

Laws that give government the power to control monopolies and to break them up are called

antitrust legislation

Which of the following is stores is most likely a price maker? a. produce stand b. art gallery c. hardware store d. coffee shop

art gallery

An example of an industry that is an oligopoly would be a. medical doctors b. auto manufacturing c. landscaping d. restaurants

auto manufacturing

Reducing or eliminating government control of business is called

deregulation

Sellers in monopolistic competition gain their limited monopoly by convincing consumers that their product is

different from the competition

A situation in which the average cost of production falls as the producer grows larger is called

economies of scale

In a market economy with perfect competition, sellers

enter and exit the market freely

A public utility, such as a water company, is an example of a

government monopoly

A merger happens when one company

joins another company to form a single firm

With monopolistic competition there are

many buyers and many sellers

An example of perfect competition is when a. many sellers compete and none control the market price b. several electronic companies form a cartel c. a seller decides to sell clothing, including shirts and jeans d. a seller is misinformed causing him or her to overprice goods

many sellers compete and none control the market price

The Sherman Anti-Trust Act gave the U.S. government the power to control a. monopolies b. public utilities c. the postal service d. the stock market

monopolies

Buyers and sellers that are well-informed about market conditions are always found in

monopolistic competition

A market structure in which only one seller sells a product for which there are no close substitutes is called a

monopoly

What is a market situation with many sellers and one large buyer called?

monopsony

A monopoly in which the costs of production are lowest when only one firm provides output is called a

natural monopoly

Using advertising to try to convince customers to buy one product rather than another is a form of

nonprice competition

A large company that manufactures automobiles can sell them for less money than a small company because

of economies of scale

An example of a public good would be a. police and fire protection b. medical care c. life insurance d. groceries

police and fire protection

The practice of setting prices below cost for a time to drive smaller producers out of a market is called

predatory pricing

A group of propane suppliers has secretly agreed to raise prices in unison. What has occurred?

price fixing

The deregulation of the airline industry caused a. prices to fall and service to decline b. prices to fall and service to improve c. prices to rise and service to decline d. prices to rise and service to improve

prices to fall and service to improve

The expenses that a new business pay to enter a market are called

start-up costs

A monopoly that exists because a firm controls an invention is called a

technological monopoly

If a company controls a specific process for making windows, it has a

technological monopoly