Quiz Questions: Chapter Four
1. In a perfectly free competitive market, no buyer or seller has the power to significantly
affect the price of a good.
a. True
2. Which of the following are characteristics of a perfectly free economy?
a. There are numerous buyers and sellers, none of whom has a substantial share of
the market.
b. All buyers and sellers can freely and immediately enter or leave the market.
c. Every buyer and seller has full and perfect knowledge of what every other buyer
and seller is doing, including knowledge of the prices, quantities, and quality of
all goods being bought and sold.
d. All the above
3. In a perfectly free economy, all buyers and sellers are utility maximizers: Each tries to
get as much as possible for as little as possible.
a. True
4. When a buyer purchases a good, each additional item of a certain type is less satisfying
than the earlier ones. This is known as:
a. The principle of increasing marginal utility
b. The principle of gross marginal utility
c. The principle of diminishing marginal utility
5. Efficiency comes about in perfectly competitive free markets when:
a. Firms are motivated to invest resources in industries with a high consumer
demand and move away from industries where demand is low.
b. Firms are encouraged firms to minimize the resources they consume to produce a
commodity and to use the most efficient technologies.
c. Commodities are distributed among buyers such that buyers receive the most
satisfying commodities they can purchase, given what is available to them and
the amount they have to spend.
d. All the above
6. In a monopoly, there is only one seller, but other sellers can enter the market.
a. True
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7. Monopolistic markets and their high prices and profits violate capitalist justice because
the seller charges more than the goods are worth. Thus, the prices the buyer must pay
are unjust.
a. True
8. The common definition of price fixing is:
a. When companies agree to set prices artificially high.
b. When companies agree to limit production.
c. When a company sells a buyer certain goods only on condition that the buyer
also purchases other goods from the firm.
d. When companies agree to limit production.
9. When a company sells a buyer certain goods only on condition that the buyer also
purchases other goods from the firm, this is known as:
a. Manipulation of supply.
b. Exclusive dealing arrangements
c. Price discrimination
d. Tying arrangement Answer: D
10. Proponents of the Antitrust view argue that prices and profits in highly concentrated
industries are higher than they should be. By breaking up large corporations into smaller
units, they claim, higher levels of competition will emerge in those industries.
a. True
11. Because Microsoft Corporation’s, market share is only 92 percent of the market in
operating systems (Windows) and 94 percent of the market in integrated office suite
software (MS Office), Microsoft is not considered a monopoly.
a. True
12. A survey of major corporate executives indicated that 60 percent of those sampled
believed that many businesses engage in price fixing.
a. True
13. When companies get together to fix prices, the result is a ______________.
a. A consortium of suppliers.
b. An oligopoly.
c. A monopoly.
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14. As in the ADM case, all that companies have to do to fix price is to agree on the price for
which the companies will sell the product.
a. True
15. The most obvious failure of monopoly markets lies in the high prices they allow the
monopoly companies to charge, violating capitalist justice.
a. True