Economics Unit 4

Several corn farmers in Iowa meet with their friends each week for breakfast. They talk about their families and about the weather. But soon they engage in more serious discussions about the future demand for corn, the latest prices being offered for their crop, and the cost of their seeds, fertilizer, and machinery.

Which characteristic of a purely competitive market BEST fits the scene described above?

• Many sellers participate in the market.

• Sellers offer identical products.

• Buyers and sellers are well informed about products.

• Sellers are able to enter and exit the market easily.

What type of market structure is shown here?

• pure competition

• monopoly

• monopolistic competition

• oligopoly

What characteristic of a purely competitive market does crude oil have?

• The product has no substitutes that are close to it in price.

• The product has an unlimited number of sellers.

• The product is always packaged in the same way.

• The product is the same no matter who produces it.

What is likely to be the MAIN barrier to entry into the business shown here?

• lack of government regulation

• limited consumer demand

• high cost of advertising

• complex technology

Which of the following industries is most likely to exist in a purely competitive market?

• shoes

• wheat

• bottled water

• personal computers

In the market represented in the graph, if one of the firms doubled its output, what would happen to the price?

• The price would rise to meet the new demand.

• The price would fall to eliminate the surplus.

• The price would rise at first and then fall.

• The price would remain the same.

Which of the following is an example of a natural monopoly?

• an automobile manufacturer

• a supermarket chain

• a subway system

• a construction company

The main advantage of firms with economies of scale is that

• no matter how high their output rises, their average cost continues to fall.

• because of their greater level of efficiency, they have lower start-up costs.

• their average cost will begin to rise only after they reach maximum output.

• they can alter the price for their product as the cost of production changes.

This business operates in Grand Teton National Park. It MOST LIKELY has been granted

• a patent.

• a league.

• a franchise.

• an exemption.

This company has a monopoly on the service it provides because

• it is a technological monopoly; no other company has the technology necessary to

  provide this service.

• it is a patent monopoly; the government has given the company exclusive rights to

  provide this service.

• it is an industrial monopoly; it bought out all of its competitors that previously provided

  this service.

• it is a natural monopoly; it would not be efficient for more than one company to provide

  this service.