Unit 3: Economics Review Part A

Which market structure consists of a few large companies that have high barriers to entry?

• Monopoly

• Oligopoly

• Perfect Competition

• Monopolistic Competition

Answer explanation

An oligopoly is characterized by a few large firms dominating the market, often with high barriers to entry that prevent new competitors from easily entering. This distinguishes it from monopoly, perfect competition, and monopolistic competition.

The athletic shoe industry consists of many different companies that make similar products, but use advertising to set them apart. What type of market structure are athletic shoes?

• Monopoly

• Oligopoly

• Perfect competition

• Monopolistic Competition

Answer explanation

The athletic shoe industry is characterized by many firms offering similar products but differentiating through advertising. This aligns with monopolistic competition, where products are similar but not identical, allowing for brand loyalty.

What type of business consists of one owner that has complete control and liability over their business operations?

• Sole Proprietorship

• Partnership

• Corporation

• Franchise

Answer explanation

A Sole Proprietorship is a business owned by one individual who has complete control and unlimited liability for its operations, making it the correct choice for this question.

In the United States, Monopolies have been made illegal by this type of law?

• Civil Laws

• Antitrust Laws

• Criminal laws

• Labor Unions

Answer explanation

Antitrust Laws are designed to prevent monopolies and promote competition in the marketplace. They make it illegal for companies to engage in anti-competitive practices, thus protecting consumers and ensuring fair trade.

Many movie theaters offer different prices for children, adults, and seniors. The prices of each ticket can also vary based on the day and chosen show time. This is an example of?

• Equilibrium price

• Price discrimination

• Price taking

• Competitive pricing

Answer explanation

This is an example of price discrimination, as movie theaters charge different prices based on age groups and other factors, allowing them to maximize revenue by targeting different customer segments.

What type of market structure consists of one firm that sets prices and has extremely high barriers to entry?

• Monopoly

• Oligopoly

• Perfect competition

• Monopolistic Competition

Answer explanation

A monopoly is a market structure where a single firm dominates the market, sets prices, and faces high barriers to entry, preventing other firms from entering. This distinguishes it from oligopoly, perfect competition, and monopolistic competition.

This cost of production does NOT change as the number of units changes. It remains the same from month to month.

• Fixed Cost

• Variable Cost

• Marginal Cost

• Total Cost

Answer explanation

Fixed costs do not vary with production levels; they remain constant regardless of the number of units produced. This is why the correct answer is Fixed Cost.

Which of the following would represent a fixed cost of a business?

• Heating Costs

• Gasoline Costs

• Rent

• Electricity Costs

Answer explanation

Rent is a fixed cost because it remains constant regardless of business activity levels. In contrast, heating, gasoline, and electricity costs can vary based on usage, making them variable costs.

This form of business allows owners to buy into the company, combining a sole proprietorship with a corporation.

• Sole proprietorship

• partnership

• corporation

• franchise

Answer explanation

A franchise allows individuals to buy into a business model, combining elements of a sole proprietorship and a corporation. This structure provides the benefits of both ownership and corporate support.

This form of business is owned by shareholders who own stocks in the company and have limited liability.

• Sole proprietorship

• Parntership

• corporation

• Franchise

Answer explanation

A corporation is owned by shareholders who hold stocks and enjoy limited liability, meaning they are not personally responsible for the company's debts. This distinguishes it from sole proprietorships and partnerships.