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Economics review 11

Quiz by Ruru j

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29 questions
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  • Q1
    Blammo Industries is a profit maximizer that sells custom made hats and is the only producer in a market. It charges some customers more than other customers because the hats bought by some buyers cost Blammo more to produce than the hats purchased by other buyers.
    Blammo industries does not have a constant marginal cost curve
    Blammo Industries is a price discriminating monopolist.
    Blammo industries operates in an industry with barriers to entry.
    Blammo industries has a downward sloping demand curve.
  • Q2
    Which of the following is true about a perfect price discriminating monopolist?
    It produces the same quantity as a perfect competitive firm with the same costs.
    It minimizes average total cost.
    It creates dead weight loss by producing a quantity where price is greater than marginal cost.
    It charges the same price to all buyers.
  • Q3
    What kind of monopoly exists when a firm controls a manufacturing method or invention?
    natural monopoly
    government monopoly
    geographic monopoly
    technological monopoly
  • Q4
    The government grants patents
    to allow inventors to recover the costs of developing the invention or technology
    so a single company can apply economies of scale
    because it is the most efficient way of providing some services
    to make sure that consumers in isolated areas are served
  • Q5
    Why must monopolies be careful not to set prices too high?
    The equilibrium price of the product will rise.
    Due to market competitors.
    Demand for the product will drop.
    Production costs will increase.
  • Q6
    Monopolistic competition occurs when
    there are no close substitutes for a product
    consumers reject brand name products
    sellers offer similar, but not standardized products
    sellers cannot differentiate products
  • Q7
    ____ are not an example of natural monopoly.
    Electricity providers.
    Gas providers.
    Water providers
    Cell phone service Providers.
  • Q8
    Why can a natural monopoly be advantageous for consumers?
    The efficiency results in lower average costs for the consumer.
    The efficiency results in more consistent service for the consumer.
    Natural monopolies ensure that everyone is provided with basic resources like electricity, water, and transportation.
    Consumers do not have to bother choosing between competing companies.
  • Q9
    A market structure where one company is the single source for a product is called a __________.
    Economy of scale
    Pure monopoly
    Legal barrier
    Public utility
  • Q10
    What controls exist to help discourage monopolies in the U.S. economy?
    The free market encourages competition, and competition will limit monopolies.
    Government regulations.
    Monopolies are completely illegal.
    Citizens can vote to dissolve a company that holds a monopoly.
  • Q11
    A key feature of a natural monopoly is that . . .
    It will always produce at a level of output where P = MC.
    It must always earn super-normal profits
    It will be state-owned.
    One firm can supply the entire market at lower prices than any two or more firms
  • Q12
    What is the biggest risk associated with monopolies?
    They limit consumer choice, so they are discouraged.
    A company with a monopoly can pick their customers, even if they discriminate against someone based on their race, gender, or religion.
    Monopolies are typically owned and run by illegal groups like gangs and mobs, so they provide legal protection to criminal activities.
    The entity with complete market share could increase prices as high as they wanted, since consumers would have nowhere else to go.
  • Q13
    Which one is NOT one of the factors that need to be met in perfect competition?
    Knowledge is available to all buyers and sellers, and no one has individual control over the prices.
    All goods are homogeneous.
    Buyers and sellers have many barriers to enter or leave the market.
    Buyers and sellers want to maximize profit.
  • Q14
    Which of the following is NOT a requirement for a perfectly competitive market?
    Firms are price takers.
    Firms sell differentiated products.
    No single firm has significant market share.
  • Q15
    Which of these industries is closest to perfect competition?
    Cell phone providers
    Car washes
    TV manufacturers

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