1) In the inverted-U theory of R&D:
A.process innovation and product innovation are inversely related.
B.technological change is inversely related to scientific discovery.
C.R&D expenditures rise continuously as a percentage of firms’ sales as industry
concentration rises.
D.R&D expenditures first rise as a percentage of firms’ sales as industry concentration
increases, but then fall as higher industry concentration occurs.
2) Concentration ratios may be inaccurate indicators of the degree of monopoly power
in an industry because:
A.they include interindustry competition.
B.foreign competition is not considered.
C.they are only calculated for local and regional markets.
D.they do not distinguish between normal and economic profit.
3) Which of the following indexes is used in Federal merger guidelines?
A.Consumer price index
B.Unemployment benefits index
C.Employment cost index
D.Herfindahl index
4)
Refer to the above graph. It shows the total product (TP) curve. At which point does
diminishing marginal returns set in?
A.Point a
B.Point b
C.Point c
D.Point d
5) The construction of demand and supply curves assumes that the primary variable
influencing decisions to produce and purchase goods is:
A.price.
B.expectations.
C.preferences.
D.incomes.
6) The conclusion that oligopoly is inefficient relative to the competitive ideal must be
qualified because:
A.industry price leaders often select a price equal to marginal cost.
B.over time oligopolistic industries may promote more rapid product development and
greater improvement of production techniques than if they were purely competitive.
C.increased output due to persuasive advertising may perfectly offset the restriction of
output caused by monopoly power.
D.many oligopolists sell their products in monopolistically competitive or even purely
competitive industries.
7) Which of the following is a provision of the Patient Protection and Affordable Care
Act?
A.Insurance companies may not legally deny coverage to anyone on the basis of a
preexisting medical condition.
B.Every firm must purchase health insurance for their employees or face a $2,000 fine
per employee.
C.Every individual must purchase their own health insurance for themselves and their
dependents or pay a fine.
D.Adult children of parents with employer-provided health insurance can remain
covered by their parents’ insurance through age 35.
8) A significant difference between a monopolistically competitive firm and a purely
competitive firm is that the:
A.former does not seek to maximize profits.
B.latter recognizes that price must be reduced to sell more output.
C.former sells similar, although not identical, products.
D.former’s demand curve is perfectly inelastic.
9) Suppose that two firms in an industry with a Herfindahl index of 5,000 announce a
merger. The U.S. Justice Department concludes the merger will boost the index to
5,500. The antitrust authorities will most likely:
A.ignore this merger because of the relatively small increase in the Herfindahl index.
B.allow the merger but watch the new firm carefully for future violations of the
antitrust laws.
C.allow the merger if foreign entry to the industry is possible.
D.prevent the merger, contending that it violates the Clayton Act.
10) A decrease in the supply of loanable funds and an increase in the demand for
loanable funds will:
A.Increase the interest rate and the quantity of funds loaned
B.Decrease the interest rate and the quantity of funds loaned
C.Increase the interest rate, but the quantity of funds loaned may either increase or
decrease
D.Decrease the interest rate, but the quantity of funds loaned may either increase or
decrease