1. A typical firm in the US economy would be classified as
a.
perfectly competitive.
b.
imperfectly competitive.
c.
a duopolist.
d.
an oligopolist.
2. The typical firm in the US economy
a.
has some degree of market power.
b.
sells its product for a price that is equal to the marginal cost of producing the last unit.
c.
is perfectly competitive.
d.
is a monopoly.
3. Which of the following pairs illustrates the two extreme examples of market structures?
a.
b.
c.
d.
4. The general term for market structures that fall somewhere between monopoly and perfect competition is
a.
incomplete markets.
b.
imperfectly competitive markets.
c.
oligopoly markets.
d.
monopolistically competitive markets.
5. The two types of imperfectly competitive markets are
a.
markets with advertising and markets with price competition.
b.
public goods and common resources.
c.
oligopoly and monopoly.
d.
monopolistic competition and oligopoly.
6. The two types of imperfectly competitive markets are
a.
monopoly and monopolistic competition.
b.
monopoly and oligopoly.
c.
monopolistic competition and oligopoly.
d.
monopolistic competition and cartels.
7. Which of the following statements is not correct?
a.
Monopolistic competition is similar to monopoly because in each market structure the firm can charge a price
above marginal costs.
b.
Monopolistic competition is similar to perfect competition because both market structures are characterized by
free entry.
c.
Monopolistic competition is similar to oligopoly because both market structures are characterized by barriers
to entry.
d.
Monopolistic competition is similar to perfect competition because both market structures are characterized by
many sellers.
8. Which of the following statements is not correct?
a.
Monopolistic competition is different from monopoly because monopolistic competition is characterized by
free entry, whereas monopoly is characterized by barriers to entry.
b.
Both monopolistic competition and oligopoly fall in between the more extreme market structures of
competition and monopoly.
c.
Monopolistic competition is different from oligopoly because each seller in monopolistic competition is small
relative to the market, whereas each seller can affect the actions of other sellers in an oligopoly.
d.
Both monopolistic competition and perfect competition are characterized by product differentiation.
9. In a market that is characterized by imperfect competition,
a.
firms are price takers.
b.
there are always a large number of firms.
c.
there are at least a few firms that compete with one another.
d.
the actions of one firm in the market never have any impact on the other firms’ profits.
10. Firms in industries that have competitors but do not face so much competition that they are price takers are operating
in either a(n)
a.
oligopoly or perfectly competitive market.
b.
oligopoly or monopoly market.
c.
oligopoly or monopolistically competitive market.
d.
monopoly or monopolistically competitive market.
11. Imperfectly competitive firms are characterized by
a.
horizontal demand curves.
b.
standardized products.
c.
a large number of small firms.
d.
price making ability.
12. An oligopoly
a.
has a concentration ratio of less than 50 percent.
b.
is a price taker.
c.
is a type of imperfectly competitive market.
d.
has many firms rather than just one firm or a few firms.
13. An oligopoly is a market in which
a.
there are only a few sellers, each offering a product similar or identical to the products offered by other firms
in the market.
b.
firms are price takers.
c.
the actions of one seller in the market have no impact on the other sellers’ profits.
d.
there are many price-taking firms, each offering a product similar or identical to the products offered by other
firms in the market.
14. One characteristic of an oligopoly market structure is:
a.
firms in the industry are typically characterized by very diverse product lines.
b.
firms in the industry have some degree of market power.
c.
products typically sell at a price equal to their marginal cost of production.
d.
the actions of one seller have no impact on the profitability of other sellers.
15. A market structure with only a few sellers, each offering similar or identical products, is known as
a.
oligopoly.
b.
monopoly.
c.
monopolistic competition.
d.
perfect competition.
16. The commercial jetliner industry consisting of Boeing and Airbus would best be described as a (an)
a.
perfectly competitive market.
b.
monopolistically competitive market.
c.
oligopoly.
d.
monopoly.
17. The breakfast cereal industry, with its concentration ratio of 80%, would best be described as a(n)
a.
perfectly competitive market.
b.
monopolistically competitive market.
c.
oligopoly.
d.
monopoly.
18. Crude oil is primarily supplied to the world market by a few Middle Eastern countries. Such a market is an example of
a(n)
(i)
imperfectly competitive market.
(ii)
monopoly market.
(iii)
oligopoly market.
a.
(i) and (ii) only
b.
(ii) and (iii) only
c.
(i) and (iii) only
d.
(iii) only
19. A concentration ratio
a.
measures the percentage of total output supplied by the four largest firms in the industry.
b.
reflects the level of competition in an industry.
c.
is related to the control that each firm has over price.
d.
All of the above are correct.
20. A concentration ratio
a.
measures the percentage of total sales of the top firm in the industry.
b.
reflects the level of competition in an industry.
c.
is inversely related to the price charged by the top firm in the industry.
d.
All of the above are correct.
21. The higher the concentration ratio, the
a.
more control an individual firm has to set prices.
b.
more competitive the industry.
c.
less competitive the industry.
d.
Both a and c are correct.
22. The lower the concentration ratio, the
a.
more control an individual firm has to set prices.
b.
more competitive the industry.
c.
less competitive the industry.
d.
Both a and c are correct.
23. Which of the following industries has the highest concentration ratio?
a.
jeans
b.
fruit
c.
household laundry equipment
d.
restaurants
24. Which of the following industries has the highest concentration ratio?
a.
dresses
b.
apples
c.
books
d.
cigarettes
25. Which of the following industries has the lowest concentration ratio?
a.
breakfast cereal
b.
electric lamp bulbs
c.
household laundry equipment
d.
cigarettes
Table 16-1
The following table shows the percentage of output supplied by the top eight firms in four different industries.
Firm
Industry A
Industry B
Industry C
Industry D
1
38%
18%
52%
23%
2
33
16
13
16
3
14
15
11
10
4
7
12
8
9
5
3
11
6
8
6
1
9
4
2
7
1
7
2
2
8
1
7
1
2
26. Refer to Table 16–1. What is the concentration ratio in Industry A?
a.
38%
b.
71%
c.
92%
d.
98%
27. Refer to Table 16–1. What is the concentration ratio in Industry B?
a.
18%
b.
34%
c.
61%
d.
95%
28. Refer to Table 16–1. What is the concentration ratio in Industry C?
a.
13%
b.
32%
c.
52%
d.
84%
29. Refer to Table 16–1. What is the concentration ratio in Industry D?
a.
23%
b.
39%
c.
58%
d.
72%
30. Refer to Table 16–1. Which industry has the highest concentration ratio?
a.
Industry A
b.
Industry B
c.
Industry C
d.
Industry D
31. Refer to Table 16–1. Which industry is the least competitive?
a.
Industry A
b.
Industry B
c.
Industry C
d.
Industry D
32. Refer to Table 16–1. Which industry has the lowest concentration ratio?
a.
Industry A
b.
Industry B
c.
Industry C
d.
Industry D
33. Refer to Table 16–1. Which industry is the most competitive?
a.
Industry A
b.
Industry B
c.
Industry C
d.
Industry D
Table 16-2
The following table shows the total output produced by the top six firms as well as the total industry output for each
industry.
Firm
Industry J
Industry K
Industry L
Industry M
1
14,288
7,878
1,554
22,987
2
12,128
7,242
1,486
21,444
3
11,192
5,321
1,294
18,787
4
3,245
4,900
1,287
16,454
5
2,442
4,526
911
12,890
6
1,004
3,800
745
10,045
Total
55,050
70,250
7,340
198,400
34. Refer to Table 16–2. What is the concentration ratio for Industry J?
a.
about 14%
b.
about 48%
c.
about 74%
d.
about 80%
35. Refer to Table 16–2. What is the concentration ratio for Industry K?
a.
about 8%
b.
about 36%
c.
about 48%
d.
about 84%
36. Refer to Table 16–2. What is the concentration ratio for Industry L?
a.
about 99%
b.
about 77%
c.
about 41%
d.
about 16%
37. Refer to Table 16–2. What is the concentration ratio for Industry M?
a.
about 96%
b.
about 52%
c.
about 40%
d.
about 22%
38. Refer to Table 16–2. Which industry has the highest concentration ratio?
a.
Industry J
b.
Industry K
c.
Industry L
d.
Industry M
39. Refer to Table 16–2. Which industry is the least competitive?
a.
Industry J
b.
Industry K
c.
Industry L
d.
Industry M
40. Refer to Table 16–2. Which industry has the lowest concentration ratio?
a.
Industry J
b.
Industry K
c.
Industry L
d.
Industry M
41. Refer to Table 16–2. Which industry is the most competitive?
a.
Industry J
b.
Industry K
c.
Industry L
d.
Industry M
Table 16-3
The following table shows the output produced by each of the top eight firms in four industries as well as the total
industry output for those industries.
Firm
Industry A
Industry B
Industry C
Industry D
1
50,000
18,000
37,000
40,000
2
47,000
17,750
36,500
39,000
3
43,000
17,250
35,500
37,000
4
38,000
16,500
34,000
34,000
5
32,000
15,500
32,000
30,000
6
25,000
14,250
29,500
25,000
7
17,000
12,750
26,500
19,000
8
8,000
11,000
23,000
12,000
Total
270,000
130,000
300,000
250,000
42. Refer to Table 16-3. What is the concentration ratio for Industry A?
a.
approximately 52%
b.
approximately 58%
c.
approximately 66%
d.
approximately 72%
43. Refer to Table 16-3. What is the concentration ratio for Industry B?
a.
approximately 46%
b.
approximately 54%
c.
approximately 57%
d.
approximately 61%
44. Refer to Table 16-3. What is the concentration ratio for Industry C?
a.
approximately 44%
b.
approximately 48%
c.
approximately 53%
d.
approximately 56%
45. Refer to Table 16-3. What is the concentration ratio for Industry D?
a.
approximately 48%
b.
approximately 54%
c.
approximately 60%
d.
approximately 66%
46. Refer to Table 16-3. Which industry has the highest concentration ratio?
a.
Industry A
b.
Industry B
c.
Industry C
d.
Industry D
47. Refer to Table 16-3. Which industry has the lowest concentration ratio?
a.
Industry A
b.
Industry B
c.
Industry C
d.
Industry D
48. Refer to Table 16-3. Based on the concentration ratio, which industry is the most competitive?
a.
Industry A
b.
Industry B
c.
Industry C
d.
Industry D
49. Refer to Table 16-3. Based on the concentration ratio, which industry is the least competitive?
a.
Industry A
b.
Industry B
c.
Industry C
d.
Industry D
Scenario 16-1
Suppose the following are the sales for all of the firms in two different industries.
Industry A
Industry B
$225,000
$400,000
$200,000
$325,000
$180,000
$300,000
$100,000
$200,000
$100,000
$95,000
$90,000
$80,000
$75,000
$78,000
$60,000
$75,000
50. Refer to Scenario 16–1. What are the concentration ratios for these industries?
a.
Industry A: 22%, Industry B: 26%
b.
Industry A: 41%, Industry B: 47%.
c.
Industry A: 68%, Industry B: 79%
d.
Industry A: 100%, Industry B: 100%.
51. Refer to Scenario 16–1. Which of the following statements is correct regarding the competitiveness of these two
industries?
a.
Industry A and Industry B are equally competitive.
b.
Industry A is more competitive than Industry B.
c.
Industry A is less competitive than Industry B.
d.
The competitiveness of these two industries cannot be determined from the information given.
52. One key difference between an oligopoly market and a competitive market is that oligopolistic firms
a.
are price takers while competitive firms are not.
b.
can affect the profit of other firms in the market by the choices they make while firms in competitive markets
do not affect each other by the choices they make.
c.
sell completely unrelated products while competitive firms do not.
d.
sell their product at a price equal to marginal cost while competitive firms do not.