True/False
Indicate whether the
statement is true or false.
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1.
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Market situations lacking one or more of the characteristics of perfect
competition are called imperfect competition.
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2.
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Perfect competition requires a market structure with freedom for firms to enter
or leave the market.
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3.
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Oligopoly is a market structure with one very large firm.
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4.
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A government monopoly is a monopoly based on ownership or control of a
manufacturing method or process.
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5.
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The monopolist does not use an equilibrium price to determine prices.
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6.
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A private agency usually approves prices for water and electric
utilities.
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7.
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“Truth in advertising laws” are designed to prevent market failures
caused by inadequate information.
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8.
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The U.S. government intervenes in the economy to reduce the costs of imperfect
competition.
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9.
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A condition of perfect competition is characterized by product
differentiation.
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10.
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The monopolistic competitor operates in a market with many well-informed buyers
and sellers.
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11.
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Non-price competition is the use of advertising, giveaways, and other
promotional campaigns to win customers.
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12.
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Smaller firms have the advantage of economies of scale over larger firms.
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13.
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Market failure can occur when resources do not move freely from one industry to
another.
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14.
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Economists describe an unintended side effect of a business activity as an
externality.
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15.
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Corporations selling stock to the public must disclose their financial and
operating information to both the public and the Securities and Exchange Commission.
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Multiple Choice
Identify the
choice that best completes the statement or answers the question.
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16.
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Perfect competition is characterized by all of the following EXCEPT
a. | a large number of buyers and sellers. | c. | sellers acting together to set
prices. | b. | identical products. | d. | well-informed buyers and sellers. |
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17.
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A monopoly that is based on the ownership or control of a manufacturing method,
process, or other scientific advance is a
a. | geographic monopoly. | c. | government monopoly. | b. | natural monopoly. | d. | technological
monopoly. |
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18.
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A decrease in competition within an industry can result in
a. | more efficient resource allocation. | b. | lower prices. | c. | a firm wielding
economic and political power. | d. | increased
output. |
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19.
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The Sherman Antitrust Act
a. | outlawed restraints and monopolies that hindered trade. | b. | nationalized the
railroads. | c. | established the FDA. | d. | applied only to
banking. |
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20.
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The government is involved in the U.S. economy for all of the following reasons
EXCEPT to
a. | promote and encourage competition. | b. | prevent monopolies that deny the public the
benefits of competition. | c. | regulate industries in which a monopoly is in
the public interest. | d. | promote the development of market
externalities. |
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21.
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Under perfect competition,
a. | products are similar but not identical. | b. | numerous
restrictions prevent firms from entering the market. | c. | no seller sells a product above the prevailing
market price. | d. | a single seller can affect price. |
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22.
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When a major car company lowers its prices, other car makers will
probably
a. | maintain existing prices. | c. | go out of
business. | b. | raise their prices. | d. | lower their prices. |
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23.
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Mergers and acquisitions might result in
a. | more competition. | c. | increases in consumer demand. | b. | smaller
companies. | d. | inadequate
competition. |
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24.
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The Clayton Antitrust Act
a. | was opposed by labor unions. | c. | outlawed price
discrimination. | b. | defended monopolies. | d. | never went into effect. |
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Completion
Complete each
statement.
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25.
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Inadequate ____________________ may enable a business to influence politics by
wielding its economic might.
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26.
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____________________ and ____________________ that are uninformed about
conditions and opportunities in a particular market can lead to market failure.
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27.
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Receiving drain on your lawn from a neighbor's sprinkler system is an
example of a ____________________.
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28.
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Externalities are classified as ____________________.
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29.
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Public goods are usually provided by the ____________________, not the
market.
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Matching
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Match each statement with the correct item below. a. | theoretical situation in which well-informed, independent buyers and sellers exchange
identical products | b. | agreeing to charge the same or similar
prices | c. | unintended side effect that either benefits or harms a third party not involved in
the activity | d. | real or imagined differences between competing products | e. | unwanted harm, cost,
or inconvenience suffered by a third party because of the actions of others | f. | legally formed
combination of corporations or companies | g. | market situation in which costs are minimized
because a single firm produces the product | h. | belief that government should not interfere
with commerce or trade | i. | situation in which average cost of production
falls as the firm gets larger | j. | market structure in which a few very larger
sellers dominate the industry |
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30.
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laissez-faire
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31.
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natural monopoly
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32.
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trust
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33.
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perfect competition
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34.
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economies of scale
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35.
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product differentiation
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36.
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externality
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37.
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oligopoly
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38.
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negative externality
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39.
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price-fixing
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Match each statement with the correct item below. a. | formal agreement to set prices or to behave in a cooperative
manner | b. | requirement that businesses reveal information to the public | c. | series of
competitive price cuts by all sellers that leads to unusually low prices | d. | market structure
with only one seller of a product | e. | products that are collectively consumed by
everyone | f. | practice of charging customers different prices for the same
product | g. | supply side of the market | h. | exclusive right to manufacture, use, or sell
any new and useful machine, manufacture, or composition of matter | i. | market structure
that lacks one or more of the conditions of perfect competition | j. | exclusive right of
authors and artists to publish, sell, or reproduce their work |
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40.
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industry
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41.
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patent
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42.
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imperfect competition
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43.
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copyright
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44.
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public disclosure
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45.
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collusion
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46.
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public goods
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47.
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price war
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48.
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discrimination
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49.
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monopoly
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Short Answer
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50.
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Summarizing Information Describe the five conditions necessary for
perfect competition to exist.
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51.
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Analyzing Information Name and describe three forms of monopolies.
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Essay
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52.
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Making Comparisons What are the differences in how an oligopoly and a
monopoly conduct business?
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53.
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Understanding Cause and Effect What positive and negative externalities
might be the consequence of the building of a new interstate highway in your community?
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54.
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Making Comparisons How do competition, product variety, and price vary
between monopolistic competitors and a monopoly?
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