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| 1 | |
What does product differentiation mean? |
| | A) | It is the attempt by the firm to offer a product similar to that of its rivals. |
| | B) | It is the attempt by the firm to offer a product seen to be different from that of its rivals. |
| | C) | It is the practice of many firms to sell more than one product. |
| | D) | It is the practice of many firms to sell the same product in more than one market. |
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| 2 | |
In which of the following market structures is entry easiest? |
| | A) | Monopolistic competition |
| | B) | Oligopoly |
| | C) | Monopoly |
| | D) | Duopoly |
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| 3 | |
What price does a monopolistically competitive firm charge? |
| | A) | A price equal to marginal cost |
| | B) | A price greater than marginal cost |
| | C) | A price equal to marginal revenue |
| | D) | A price less than average cost |
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| 4 | |
What is the level of economic profits earned by a firm operating in the short-run under conditions of monopolistic competition? |
| | A) | It is positive. |
| | B) | It is likely to be positive but could be negative. |
| | C) | It is zero. |
| | D) | It is negative. |
| | E) | 5 |
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| 5 | |
Graphically, what will be the effect of entry by new firms into a monopolistically competitive industry? |
| | A) | It will shift each firm's demand curve to the right. |
| | B) | It will shift each existing firm's demand curve to the left. |
| | C) | It will shift the market's supply curve to the left. |
| | D) | It will shift the market's demand curve to the right. |
| | E) | 5 |
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| 6 | |
What will be the long-run result of new firms entering a monopolistically competitive industry? |
| | A) | The price charged by the representative firm will be equal to marginal cost. |
| | B) | The representative firm will certainly incur losses. |
| | C) | While the representative firm will not make economic profits, it will be able to make normal profits. |
| | D) | The representative firm will be able to maintain economic profits. |
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| 7 | |
What is meant by the term allocative efficiency? |
| | A) | A firm is producing an output that equals minimum AC. |
| | B) | A firm is producing an output and charging a price that equals minimum AC. |
| | C) | A firm is charging a price equal to MC. |
| | D) | A firm has achieved its MES. |
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| 8 | |
All of the following, except one, are oligopoly industries. Which is the exception? |
| | A) | The manufacture of automobiles |
| | B) | The manufacture of cigarettes |
| | C) | The provision of accounting services |
| | D) | The provision of long-distance telephone services |
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| 9 | |
All of the following statements, except one, are correct concerning the cartel variant of oligopoly theory. Which is the exception? |
| | A) | An effective cartel restricts the supply of the product being sold. |
| | B) | The individual members of the cartel must agree to and respect quotas on their output. |
| | C) | The primary threat to the success of a cartel is government regulation. |
| | D) | The output and the price of the cartel is often similar to that of a monopoly. |
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| 10 | |
All of the following statements, except one, are correct about game theory analysis. Which is the exception? |
| | A) | It has led some economists to conclude that the likelihood of cheating is a more effective barrier to collusion than government legislation. |
| | B) | It emphasizes the importance of mutual interdependence. |
| | C) | It is an attempt to explain firm behaviour. |
| | D) | It shows that it is rational for each firm to trust the other. |
| | E) | It is able to predict a likely outcome of two firms engaged in considering a specific action. |
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| 11 | |
Most economic theory is based on the assumption that firms have one goal. Which of the following is that goal? |
| | A) | Profit maximization |
| | B) | Continued growth of the corporation's sales and size of operations |
| | C) | The achievement of management autonomy in decision making |
| | D) | Development of state-of-the art technology |
| | E) | Enhancement of the company's image and the management's pride |
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| 12 | |
Product differentiation includes all, except one, of the following. Which is the exception? |
| | A) | Developing a recognized brand name or product logo |
| | B) | Securing a superior location or developing a reputation for exceptional service |
| | C) | Engaging in product development or improvement |
| | D) | Developing an effective advertising strategy |
| | E) | Charging a price lower than the competitor's |
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