Economics
1.
Week 2 Test
An oligopoly is best described as a market structure in which
A.
a single company dominates a market
B.
new laws are created to help govern market conditions
C.
a small number of companies dominate a market
D.
companies obtain government funding to market new products
2
In which of the following market structures would a consumer find the greatest number of
businesses selling identical products?
A.
oligopoly
B.
monopoly
C.
pure price competition
D.
monopolistic competition
3.
Which of the following describes a situation in which a single company dominates an
entire industry?
A.
oligopoly
B.
monopoly
C.
pure competition
D.
monopolistic competition
4.
A monopoly is most accurately described as a market structure that has
A.
a single seller dominating an industry
B.
a number of sellers the agree to share control of an industry
C.
intense competition among sellers in an industry
D.
government control over the number of competitors in an industry
5.
A company with many competitors begins to offer consumers warranty periods that are
twice as long as those of any other company. This is an example of
A.
subsidization
B.
monopolization
C.
pure price competition
D.
monopolistic competition
6.
Monopolistic competition refers to market structure that has
A.
many firms competing to sell identical products or services
B.
one firm dominating sales in the market for a product or service
C.
one firm agreeing to purchase all other firms in a particular industry
D.
many firms selling similar products that vary slightly from one another
7.
Which of the following businesses is most likely to operate within a market structure of
pure price competition?
A.
a wheat farm
B.
a shoe company
C.
an office supply store
D.
an automobile manufacturer
8.
In a pure market economy, competition among sellers is primarily the result of
A.
social programs and welfare policies
B.
government mandates and regulations
C.
traditional economic roles and values
D.
self-interest and motivation for profit
9.
An economist would most likely define a PRICE SEARCHER as a business that
A.
competes with other companies solely on the basis of price
B.
seeks the optimum price to charge for its goods or services
C.
surveys its customers to determine what prices to charge for goods
D.
sets the price for its products where the greatest profit can be made
10.
An economist would most likely define a PRICE TAKER as a business that
A.
accepts the market price, and decides how much to produce
B.
rejects the market price, and attempts to increase overall demand
C.
pushes the market price downward, but experiences great losses as a result
D.
allows market prices to fluctuate, but produces the same amount at each price
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Company Z attempts to attract new business by:
*differentiating its product lines
*offering unique customer services
*creating innovative public relations programs
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11.
Based on the information above, Company Z is most likely engaging in
A.
collusion
B.
price taking
C.
pure price competition
D.
monopolistic competition
12.
A clothing retailer attempts to sell more products by featuring popular musicians in its
advertisements. This is an example of
A.
an oligopoly
B.
a monopoly
C.
pure price competition
D.
nonprice competition
*Company A sells running shoes and offers over 15 models to chose from.
*Company B sells running shoes similar to those sold by Company A, but with
bright colors and a different logo.
*Company C sells running shoes similar to those of Company A, but offers to
custom –fit each pair to each individual customer.
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13.
The information above suggests that Companies A, B, and C are operating in a market
structure that has
A.
monopolistic competition
B.
perfect competition
C.
oligopsony power
D.
none of the above
14.
Which of these is the most likely result of collusion among sellers in a particular market?
A.
greater production
B.
reduced competition
C.
improved product quality
D.
lower prices for consumers
15.
Which of the following statements about oligopolies in the United States would an
economist most likely agree with?
A.
Collusion among businesses in an oligopoly usually benefits consumers.
B.
Businesses in an oligopoly face legal obstacles to successful collusion.
C.
The level of competition in a market increases when oligopolies are formed.
D.
The government generally encourages collusion among businesses in an
oligopoly.
16.
Which of these fictitious situations best illustrates the concept of collusion?
A.
Three major record companies secretly agree to charge higher prices for all CDs
sold in the country.
B.
Three airline companies start a price war by cutting prices on all domestic flights
by fifteen percent.
C.
Two software companies form a joint venture to share technology and produce a
new product.
D.
Two local competing bakeries begin offering similar cake designs during the
holiday season.
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I. Fewer products are produced
II. Products sell at higher prices
III. Competitors enter the market easily
IV. Consumers have wide variety of choices
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17.
Which attributes from the list above are most often associated with a monopoly market
structure?
A.
I and II only
B.
I and III only
C.
II and III only
D.
III and IV only
18.
Large firms often spend great sums of money on advertising while keeping their retail
prices similar to their competitors’ prices. This strategy is a characteristic of
A.
monopolistic competition
B.
pure price competition
C.
monopoly
D.
oligopoly
19.
If many companies compete to produce one type of product, which of the following will
probably happen?
A.
the quality of the product will improve
B.
consumers will continue to buy the brand they have been using
C.
the cost of the product will rise because of increased business costs
D.
a new firm will have no difficulty capturing the market for that product
20.
An industry that is dominated by a few firms and into which it is difficult for other firms to
enter is called
A.
pure price competition
B.
monopolistic competition
C.
oligopoly
D.
monopoly
21.
Which of the following types of markets has the highest market concentration?
A.
pure price competition
B.
monopolistic competition
C.
oligopoly
D.
monopoly
22.
For a market to be considered an oligopoly, at least _?_ of the market must be dominated
by a few companies.
A.
20%
B.
40%
C.
60%
D.
80%
23.
In monopolistic competitive markets, firms usually sell products that _?_.
a. are completely different
b. are identical
c. are similar
24. Which statement most accurately describes the owners of General Motors corporation?
a. the individuals that have purchased shares of stock
b. the owners of the company’s bonds
c. the people who serve on its Board of Directors
25. Which of the following is an advantage enjoyed by corporations but not sole proprietorships
and partnerships?
a. double taxation
b. ease of organizing
c. limited liability
26. The major disadvantage of a sole proprietorship is related to _?_.
a. the cost of organizing the business
b. the owner’s liability
c. the payment of special taxes
27. Which type of business organization in the USA has the greatest financial assets?
a. corporations
b. partnerships
c. sole proprietorships
28. The Electric Shack Computers and Electronics Company has agreed to sell John Stempel
one its stores. John will be permitted to operate the business as if it were part the Electric Shack
chain. In exchange, he has promised to pay the company a monthly fee and to purchase all of
his supplies from the company. The business that John Stempel has bought is a(n) _?_.
a. conglomerate
b. franchise
c. partnership
29. Which type of business organization that has the MOST businesses in the USA is _?_.
a. corporations
b. partnerships
c. sole proprietorships
30. Mr. Chips opens a cookie store. He later invites a friend, Mr. Chocolate, to be his partner.
Mr. Chocolate invests $10,000 in the store. How has Mr. Chips benefited by organizing a
partnership? The partnership has _?_.
a. added capital
b. greater tax advantages
c. limited liability
31. Which type of merger reduces the number of competing firms in an industry?
a. conglomerate
b. horizontal
c. vertical
32. When Mattel, Inc tried to buy Hasbro, Inc, another toy company, it illustrated an effort to
create a _?_ merger.
a. conglomerate
b. horizontal
c. vertical
33. . Ajax Inns, a motel chain, bought controlling interest in the Ulysses Mining Company and
Paris Paints, Inc. Ajax’s purchases created a _?_ merger.
a. conglomerate
b. horizontal
c. vertical
34. The national government will investigate a merger if the merger results in the company
controlling more than _?_ of the market.
a. 25%
b. 50%
c. 75%
MATCHING: Each question listed below needs TWO answers.
A. Limited Liability
C. Limited Life
35. Sole Proprietorships
36. Partnerships
37. Corporations
B. Unlimited Liability
D. Unlimited Life