Economics Quiz

If a firm enjoys economies of scale,

• Its average total cost will increase as production increases

• Its marginal revenue will increase as production increases

• Its average total cost will decrease as production increases

• Its operation costs will decrease as production increases

In a monopoly market, the market quantity sold will be ______ the quantity sold in a perfectly competitive market.

• Greater than

• Less than

• Equal to or less than

• Greater than or less than

In a monopoly market, the market price will be ______ the price in a perfectly competitive market.

• Greater than

• Less than

• Equal to or less than

• Greater than or less than

Which of the following statements is true about profits in a monopolistically competitive market?

• Most firms will earn BIG profits from year to year

• Many firms will earn profits in the short term, but they must constantly innovate and compete to earn profits in the long term

• Profits are rare in monopolistically competitive markets

• Monopolistically competitive firms are as profitable as monopoly firms

Why do companies practice price discrimination?

• Price discrimination enables companies to charge all consumers the same price for a good or service

• Price discrimination allows companies to defend an illegal monopoly against free market competition

• Price discrimination provides individual producers with an advantage in perfectly competitive markets

• Price discrimination recognizes that groups of consumers are willing and able to pay different amounts and maximizes profits by charging each group a different price

How much control over price do companies in a perfectly competitive market have?

• None

• Very little

• Some

• Total control

Which of the following is NOT an example of barriers to entry?

• Cable companies must lay miles of underground cable before they can serve a single customer in a new market

• Requiring retail stores to be closed on Sundays

• An entrepreneur wishing to own a clothing store must rent a building, hire workers, and buy clothing for sale

• A person who wishes to practice medicine is required to attend medical school, complete an internship, and pass a state exam

Sunshine Island has three large supermarkets that supply most of the groceries for the island's population. A gas station also sells a very small selection of groceries. How would you describe the market for groceries on Sunshine Island?

• Perfect competition

• Monopolistic competition

• Oligopoly

• Monopoly

What is the definition of an oligopoly?

• One firm producing 95 percent of the output

• Two to four firms producing 70 to 80 percent of the output

• Eight to ten firms producing 50 to 60 percent of the output

• Eight to ten firms producing ALL of the output

Which of the following is NOT a condition of perfect competition?

• Many buyers and sellers participate in the market

• Sellers offer a wide variety of products

• Buyers and sellers are well informed about products

• Sellers are able to enter and exit the market freely