Econ Unit 4 FA Dummy 3, 2025-26

A city invests in a costly light rail system. Despite low ridership, the price remains subsidized and does not match the marginal cost. What market condition is most likely occurring?

• Deadweight Loss

• Allocative Inefficiency

• Monopsony

• Price Elasticity

A firm charges a price well above the marginal cost of production. As a result, fewer consumers can afford the product, and overall welfare declines. This is an example of:

• Economies of Scale

• Allocative Inefficiency

• Price Rigidity

• Supply Disruption

In a regulated water market, consumers are charged flat monthly fees regardless of usage. This leads to overconsumption and resource strain. What economic issue is most evident here?

• Fixed Cost Overload

• Allocative Inefficiency

• Market Segmentation

• Scarcity Allocation

A policymaker observes that consumers are being encouraged to overconsume subsidized fossil fuels because prices are far below the actual social costs. Which economic problem does this reveal?

• Demand Inflation

• Allocative Inefficiency

• Fiscal Irregularity

• Comparative Advantage Failure

In a perfectly competitive market, firms produce where price equals marginal cost. If a market fails to meet this condition, it results in:

• Allocative Inefficiency

• Diminishing Returns

• Price Collusion

• Negative Externality

What term describes a market structure where firms have some control over price and offer products that are differentiated, lying between perfect competition and monopoly?

• Perfect Competition

• Monopolistic Competition

• Imperfect Competition

• Oligopoly

Imperfect Competition is best defined as:

• A market with many sellers offering identical products

• A market where a single firm dominates all sales

• A market structure with firms having some price control

• A market dominated by a few firms with identical products

Which market structure falls between monopoly and perfect competition, characterized by firms that influence prices and differentiate their products?

• Oligopoly

• Imperfect Competition

• Monopoly

• Perfect Competition

A market where companies sell similar but not identical products and have some ability to set prices is called:

• Perfect Competition

• Imperfect Competition

• Monopoly

• Cartel

A recent study found that when firms in a local market began differentiating their products and adjusting prices independently, the market shifted from perfect competition toward:

• Monopoly

• Imperfect Competition

• Oligopoly

• Monopolistic Competition