Perfect Competition and Question

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Take Test: Chapter 15 & 16 Microeconomics .Content Assistive Technology Tips [opens in new window] InstructionsDescription
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Multiple Attempts This Test allows 2 attempts. This is attempt number 1. Force Completion This Test can be saved and resumed later.

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Question 1

Which of the following statements is correct?
Answer a. Both a competitive firm and a monopolist are price makers. b. A competitive firm is a price maker, whereas a monopolist is a price taker. c. Both a competitive firm and a monopolist are price takers. d. A competitive firm is a price taker, whereas a monopolist is a price maker. .2 points

Question 2

A monopoly
Answer a. can set the price it charges for its output but faces a downward-sloping demand curve so it cannot earn unlimited profits. b. can set the price it charges for its output and earn unlimited profits. c. takes the market price as given and earns small but positive profits. d. can set the price it charges for its output but faces a horizontal demand curve so it can earn unlimited profits. .2 points

Question 3

Because a monopolist does not face competition from other firms, the outcome in a market with a monopoly Answer a. is often not in the best interest of society.
b. is characterized by unlimited profits.
c. does not illustrate profit maximization.
d. would be improved if the government produced the product rather than a private firm. .2 points
Question 4

Microsoft faces very little competition from other firms for its Windows software. Why isn’t the price of the software $1,000 per copy? Answer a. because the government would not allow such a high price b. because stockholders would not allow such a high price c. because the company would sell so few copies that they would earn higher profits by selling at a lower price d. All of the above are correct.

.2 points
Question 5

Which of the following is not a characteristic of a monopoly? Answer a. barriers to entry
b. one seller
c. one buyer
d. a product without close substitutes
.2 points
Question 6

The fundamental source of monopoly power is
Answer a. a product without close substitutes.
b. barriers to entry.
c. decreasing average total cost.
d. profit.
.2 points
Question 7

A monopoly market is characterized by
Answer a. barriers to entry.
b. many buyers and sellers.
c. “natural” products.
d. a Nash equilibrium.
.2 points
Question 8

The simplest way for a monopoly to arise is for a single firm to Answer a. own a key resource.
b. decrease its price below its competitors’ prices.
c. make pricing decisions jointly with other firms.
d. decrease production to increase demand for its product. .2 points
Question 9

Suppose most people regard emeralds, rubies, and sapphires as close substitutes for diamonds. Then DeBeers, a large diamond company, has Answer a. less incentive to advertise than it would otherwise have. b. less market power than it would otherwise have.

c. more control over the price of diamonds than it would otherwise have. d. higher profits than it would otherwise have.
.2 points
Question 10

Which of the following would be most likely to have monopoly power? Answer a. a large department store
b. a local cable TV provider
c. a gas station
d. a long-distance telephone service provider
.2 points
Question 11

Which of the following would be most likely to have monopoly power? Answer a. a national florist
b. a local electrical cooperative
c. an online bookstore
d. a local restaurant
.2 points
Question 12

A firm that is the sole seller of a...
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