Economics: Principles and Practices © 2008

Chapter 7: Market Structures

Multiple Choice Quiz

1
A large number of well-informed independent buyers and sellers who exchange identical products characterizes the market structure called ______.
A)perfect competition
B)monopolistic competition
C)oligopoly
D)monopoly
2
The profit maximizing quantity of output is found where the _______.
A)marginal revenue from sales is greater than the marginal cost of production
B)marginal cost of production is equal to the marginal revenue from sales
C)marginal cost of production is greater than the marginal revenue from sales
D)minimum number of workers produces the maximum output of units
3
Unlike perfect competition, monopolistic competition features ______.
A)independent buyers and sellers
B)well-informed buyers and sellers
C)real or imagined product differences
D)freedom for buyers and sellers
4
A free enterprise economy may fail if _______.
A)adequate competition exists in all markets
B)buyers are ill-informed about the market
C)resources move freely between industries
D)prices reflect the costs of production
5
Why does government subsidize K-12 education?
A)Education is an example of a negative externality.
B)Education is an example of a positive externality.
C)Prospective students have inadequate information.
D)Higher education is a public good.
6
An example of market failure due to inadequate information is illustrated by a _________.
A)firm spending its profits on executive jets and lucrative salaries
B)corporation threatening to move if local government refuses it a tax break
C)low return on money that could have earned more in another investment
D)building company that accepts the federal government's low bid for a new dam
7
An example of a negative externality is when _______.
A)people who have more education earn more money
B)an airport expands and nearby residents suffer from noise and congested traffic
C)few buyers can be found to purchase space shuttles and super computers
D)an accountant at an auto factory earns less than an accountant in an insurance office
8
Antitrust legislation has been passed to allow the government to _______.
A)compete with private companies
B)break up monopolies
C)create combinations of companies
D)prevent interference with trusts
9
Investigating accidents at the workplace is the responsibility of the ______.
A)National Labor Relations Board
B)Equal Employment Opportunity Commission
C)Environmental Protection Agency
D)Occupational Safety and Health Administration
10
In the case of natural monopolies, the goal of government regulations is to ______.
A)stop price-fixing, which reduces competition among firms
B)take advantage of the monopolies' lower production costs
C)set a level of price and service that would exist under competition
D)halt the growth of natural monopolies or to break them up entirely
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