1. A nondiscriminating pure monopolist is generally viewed as: (Points : 1)       Productively efficient, but allocatively inefficient

      Productively inefficient, but allocatively efficient

      Both productively and allocatively inefficient

      Both productively and allocatively efficient

Question 2.
2. In a duopoly, if one firm increases its price, then the other firm can: (Points : 1)       keep its price constant and thus increase its market share

      keep its price constant and thus decrease its market share

      increase its price and thus increase its market share

      decrease its price and thus decrease its market share

Question 3.
3. One defining characteristic of pure monopoly is that: (Points : 1)       The monopolist is a price taker

      The monopolist uses advertising

      The monopolist produces a product with no close substitutes

      There is relatively easy entry into the industry, but exit is difficult

Question 4.
4. The MR = MC rule applies: (Points : 1)       to firms in all types of industries.

      only when the firm is a “price taker.”

      only to monopolies.

      only to purely competitive firms.

Question 5.
5. Electric utilities generally charge higher prices for electricity used for illumination and lower prices for electricity used for heat. These lower prices for electric heat result primarily from: (Points : 1)       the existence of good heating substitutes

      economies of scale in electric heat generation

      prices for electric heat being set at the socially optimal level

      strict government regulation of the price charged for electric heat

Question 6.
6. If a monopolized industry should become purely competitive without any change in cost conditions: (Points : 1)       Both price and quantity produced will increase

      Both price and quantity produced will decrease

      Price will increase and quantity produced will decrease

      Price will decrease and quantity produced will increase

Question 7.
7. Sam owns a firm that produces tomatoes in a purely competitive market. The firm’s demand curve is: (Points : 1)       A vertical line

      A horizontal line

      Upsloping to the right

      Downsloping to the right

Question 8.
8. Which is not a basic market model? (Points : 1)       Pure competition

      Free enterprise

      Oligopoly

      Monopoly

Question 9.
9. A positive effect of advertising for society is that it: (Points : 1)       increases market share for the dominant firm in the industry.

      provides useful information to reduce search cost for consumers.

      raises barriers to entry into the industry and protects existing firms.

      creates price leadership and gives firms guidance in dealing with rivals.

Question 10.
10. A major reason that firms form a cartel is to: (Points : 1)       reduce the elasticity of demand for the product.

      enlarge the market share for each producer.

      minimize the costs of production.

      maximize joint profits.

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