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1. (TCO 3) Which market model assumes the least number of firms in an industry? (Points : 3) 
       Monopolistic competition
       Pure competition
       Pure monopoly
2. (TCO 3) Under which market model are the conditions of entry into the market easiest? (Points : 3) 
       Pure competition
       Pure monopoly
       Monopolistic competition
3. (TCO 3) The steel and automobile industries would be examples of which market model? (Points : 3) 
       Monopolistic competition
       Pure competition
       Pure monopoly
4. (TCO 3) Sam owns a firm that produces tomatoes in a purely competitive market.  The firm's demand curve is (Points : 3) 
       a vertical line.
       a horizontal line.
       upward-sloping to the right.
       downward-sloping to the right.
5. (TCO 3) T-Shirt Enterprises is selling in a purely competitive market.  It is producing 3,000 units, selling them for $2 each.  At this level of output, the average total cost is $2.50 and the average variable cost is $2.20.  Based on these data, the firm should (Points : 3) 
       shut down in the short run.
       decrease output to 2,500 units.
       ontinue to produce 3,000 units.
       increase output to 3,500 units.
6. (TCO 3) A firm should always continue to operate at a loss in the short run if (Points : 3) 
       the firm will show a profit.
       the owner enjoys helping her customers.
       it can cover its variable costs and some of its fixed costs.
       the firm cannot produce any other products more profitably.
7. (TCO 3) In pure competition, price is determined where the industry (Points : 3) 
       demand and supply curves intersect.
       total cost is greater than total revenue.
       demand intersects the individual firm's marginal cost curve.
       average total cost equals total variable costs.
8. (TCO 3) One feature of pure monopoly is that the monopolist is (Points : 3) 
       a producer of products with close substitutes.
       one of several producers of a product.
       a price taker.
       a price maker.
9. (TCO 3) Barriers to entry (Points : 3) 
       usually result in pure competition.
       can result from government regulation.
       exist in economic theory but not in the real world.
       are typically the result of wrongdoing on the part of a firm.
10. (TCO 3) One feature of pure monopoly is that the demand curve (Points : 3) 
       is vertical.
       is horizontal.
       slopes upward.
       slopes downward.
11. (TCO 3) Which is the best example of price discrimination? (Points : 3) 
       An airline company charging lower fares per pound for air freight than for passengers.
       A telephone company charging lower rates to weekend users than weekday users.
       A supermarket charging lower prices in its inner city store than its out-of-town store.
       A private doctor charging higher fees to patients receiving special services than patients receiving regular services.
12. (TCO 3) In which industry is monopolistic competition most likely to be found? (Points : 3) 
       Retail trade
13. (TCO 3) Assume that in a monopolistically competitive industry, firms are earning economic profit.  This situation will (Points : 3) 
       reduce the excess capacity in the industry as firms expand production.
       attract other firms to enter the industry, causing the firm's profits to shrink.
       cause firms to standardize their product to limit the degree of competition.
       make the industry allocatively efficient as each firm seeks to maintain its profits.
14. (TCO 3) In an oligopolistic market there are (Points : 3) 
       many buyers.
       few buyers.
       few sellers.
       many sellers.
15. (TCO 3) A high concentration ratio indicates that (Points : 3) 
       the industry is highly profitable.
       the industry is highly competitive.
       many firms produce most of the output in an industry.
       few firms produce most of the output in an industry.
16. (TCO 3) A major reason that firms form a cartel is to (Points : 3) 
       reduce the elasticity of demand for the product.
       enlarge the market share for each producer.
       minimize the costs of production.
       maximize joint profits.
17. (TCO 1) The four factors of production are (Points : 3) 
       land, labor, capital, and money.
       land, labor, capital, and entrepreneurial ability.
       labor, capital, technology, and entrepreneurial ability.
       labor, capital, entrepreneurial ability, and money.
18. (TCO 1) Refer to the diagram which is based on the Circular Flow Model in Chapter 2.  Arrows (3) and (4) represent
Graph Description
(Points : 3) 
       goods and services, respectively.
       incomes and consumer expenditures, respectively.
       resources and goods, respectively.
       consumer expenditures and income, respectively.
19. (TCO 2) Refer to the diagram.  A decrease in quantity demanded is depicted by a
Graph Description
(Points : 3) 
       move from Point x to Point y.
       shift from D1 to D2.
       shift from D2 to D1.
       move from Point y to Point x.
20. (TCO 2) Refer to the information and assume the stadium capacity is 5,000.  If the Mudhens' management wanted a full house for the game, it would
Price per Ticket Quantity Demanded 
 $13 1,000
 11 2,000
 9 3,000
 7 4,000
 5 5,000
 3 6,000
(Points : 3) 
       set price so as to maximize its total revenue.
       encourage scalpers to sell their tickets for more than $7.
       set ticket prices at $5.
       set ticket prices at $9.
21. (TCO 2) Which of the following goods will least likely suffer a decline in demand during a recession? (Points : 3) 
       Dinner at a nice restaurant
       Plasma-screen and LCD TVs
22. (TCO 3) In the figure, Curves 1, 2, 3, and 4 represent the
Graph Description
(Points : 3) 
       ATC, MC, AFC, and AVC curves, respectively.
       MC, AFC, AVC, and ATC curves, respectively.
       MC, ATC, AVC, and AFC curves, respectively.
       ATC, AVC, AFC, and MC curves, respectively.
23. (TCO 1) Refer to the diagram.  Points A, B, C, D, and E show
Graph Description
(Points : 3) 
       that the opportunity cost of bicycles increases, while that of computers is constant.
       combinations of bicycles and computers that society can produce by using its resources efficiently.
       that the opportunity cost of computers increases, while that of bicycles is constant.
       that society's demand for computers is greater than its demand for bicycles.
24. (TCO 3) What type of barrier to entry was used by De Beers throughout much of its history to maintain its monopoly position? (Points : 3) 
       Patent protection
       Government regulation
       Economies of scale
       Ownership of an essential resource

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