Economics: Market Structures and Macroeconomics

Market competitors are least likely to use advertising as a tool of differentiation

in an industry structure identified as:

• monopoly.

• perfect competition.

• monopolistic competition.

Upsilon Natural Gas, Inc. is a monopoly enjoying very high barriers to entry.

Its marginal cost is $40 and its average cost is $70. A recent market study has

determined the price elasticity of demand is 1.5. The company will most likely

set its price at:

• $40.

• $70.

• $120.

Companies most likely have a well-defined supply function when the market

structure is:

• oligopoly.

• perfect competition.

• monopolistic competition.

SigmaSoft and ThetaTech are the dominant makers of computer system software. The market has two components: a large mass-market component in which demand is price sensitive, and a smaller performance-oriented component in which demand is much less price sensitive. SigmaSoft’s product is considered to be technically superior. Each company can choose one of two strategies:

● Open architecture (Open): Mass market focus allowing other software venders to develop products for its platform.

● Proprietary (Prop): Allow only its own software applications to run on its platform.

The Nash equilibrium for these companies is:

• proprietary for SigmaSoft and proprietary for ThetaTech.

• open architecture for SigmaSoft and proprietary for ThetaTech.

• proprietary for SigmaSoft and open architecture for ThetaTech.

Oligopolistic pricing strategy most likely results in a demand curve that is:

• kinked.

• vertical.

• horizontal.

An analyst gathered the following market share data for an industry comprised of five companies:

The industry’s three-firm Herfindahl–Hirschmann Index is closest to:

• 0.185.

• 0.225.

• 0.235.

Which of the following statements is the most appropriate description of gross

domestic product (GDP)?

• The total income earned by all households, firms, and the government

  whose value can be verified

• The total amount spent on all final goods and services produced within the economy during a given period

• The total market value of resalable and final goods and services produced

  within the economy during a given period

A GDP deflator less than 1 indicates that an economy has experienced:

• inflation.

• deflation.

• stagflation.

Equality between aggregate expenditure and aggregate output implies that the

government’s fiscal deficit must equal:

• Private saving – Investment – Net exports.

• Private saving – Investment + Net exports.

• Investment – Private saving + Net exports.

One of the reasons aggregate demand curve is downward sloping is because a

lower price level means that the real exchange rate:

• depreciates, making domestic goods cheaper in other countries and imports

  less competitive, resulting in a higher level of net exports.

• appreciates, making domestic goods more expensive in other countries and

  imports more competitive, resulting in a higher level of net exports.

• appreciates, making the country’s exports and imports less competitive and leading to lower net exports.