Multiple Choice Quiz


1	The price of oil has been historically highly sensitive to
		A)	which party controlled Congress.
		B)	events in Southeast Asia.
		C)	events in the Middle East.
		D)	policies of the European Oil Importers Union.


2	World Oil reserves are
		A)	highly concentrated in North Africa.
		B)	highly concentrated in South America.
		C)	highly concentrated in the Persian Gulf.
		D)	spread evenly throughout the Western industrialized countries.


3	OPEC
		A)	is a cartel of oil consuming nations.
		B)	is a cartel of producing countries that are all in the Middle East.
		C)	is a cartel of producing countries, with most, but not all members in the Middle East.
		D)	is the largest oil company in the world.


4	OPEC
		A)	meets the strict definition of a cartel because it has an absolute monopoly in oil production.
		B)	does not have an absolute monopoly on production (it accounts for slightly less than half oil production) but has substantial control over oil price.
		C)	has not more power over the oil market than any of the other oil conglomerates.
		D)	ceased to exist in the 1970s.


5	The current price for oil and gas can change rapidly because of
		A)	changes in the expected future price of oil and gas.
		B)	rapid changes in the income of oil consumers.
		C)	wild swings in the demand for oil in industry.
		D)	the monopoly power that British Petroleum has in the world.


6	The price of any good where a cartel controls production is
		A)	likely to be stable.
		B)	likely to be unstable because of wild swings in input prices.
		C)	likely to be unstable because firms make agreements to cut production but have an economic incentive to cheat on those agreements.
		D)	likely to be unstable because firms make agreements to increase production but have an economic incentive to cheat on those agreements.


7	Residential electricity is typically sold in markets governed by
		A)	regulated perfect competitors.
		B)	unregulated perfect competitors.
		C)	regulated monopolists.
		D)	unregulated monopolists.


8	To get the price that an unregulated natural monopoly will charge off a diagram
		A)	you read horizontally across from the point where marginal cost crosses demand.
		B)	you read horizontally across from the point where marginal cost crosses marginal revenue.
		C)	you read horizontally across from the point where average cost crosses demand.
		D)	you take the quantity where marginal cost equals marginal revenue up to the demand curve and over to the price axis.


9	A regulated natural monopoly is going to have its price set so that it makes normal profit and this occurs
		A)	at the price where marginal cost crosses demand.
		B)	at the price where marginal cost crosses marginal revenue.
		C)	at the price where average cost crosses demand.
		D)	at the price that you get when you find the quantity where marginal cost equals marginal revenue and go up to the demand curve and over to the price axis.


10	The California electricity crisis of 2000 occurred, in part, because
		A)	rates were re-regulated.
		B)	deregulation of wholesale rates occurred while residential rates remained regulated.
		C)	all electricity rates where deregulated.
		D)	deregulation of residential rates occurred while wholesale rates remained regulated.

2003 McGraw-Hill Higher Education
Any use is subject to the Terms of Use and Privacy Policy.
McGraw-Hill Higher Education is one of the many fine businesses of The McGraw-Hill Companies.