QUESTION 1
1. Which of the following is not true about advertising?
It is a form of nonprice competition.
It raises the price of goods and services.
It creates brand loyalty.
It results in efficient allocation of resources.

QUESTION 2
1. The cross-price elasticity of demand for the products of monopolistically competitive firms is
Very high.
The same as in perfect competition
An indication that most of the products are complementary goods.
Low.

QUESTION 3
1. Which of the following characterizes the difference between oligopoly and monopolistic competition?
There are many oligopolists but only a few monopolistically competitive firms.
Monopolistically competitive firms face horizontal demand curves; oligopolists face downward-sloping demand curves.
Oligopolists are independent of each other; monopolistically competitive firms are interdependent.
Monopolistically competitive firms experience zero long-run economic profit; oligopolists may experience positive long-run economic profit.

QUESTION 4
1. Marginal cost pricing means that
Goods are offered for sale at prices equal to average total cost.
Firms produce where marginal cost equals zero
Firms produce where marginal cost equals marginal revenue.
Goods are offered for sale at prices equal to marginal cost.

QUESTION 5
1. The typical slope of the demand curve as perceived by a monopolistic competitor will
reflect that firm's ability raise its price without losing all of its customers.
be reflective of a perfectly competitive firm and all of the above.
be steeper than the demand curve perceived by a monopolist.
show less of a decline in demand than would a monopoly that raised its prices.

QUESTION 6
1. A _________ refers to a group of firms colluding with one another to produce at the monopoly output and sell at the monopoly price.
game theory
prisoner's dilemma
duopoly
cartel

QUESTION 7
1. Brand loyalty
Leads to one price for all brands.
Is possible only when there are a few firms in the market.
Makes the demand curve facing the firm more price-elastic.
Exists even when products are virtually identical.

QUESTION 8
1. The Herfindahl-Hirshman Index is
Used to identify cases worthy of antitrust concern.
A barrier to entry.
An example of government failure.
A way to account for the combined market share of the top four firms.

QUESTION 9
1. Collusion is undesirable and illegal because
Resources are misallocated and the level of output is restricted.
Government intervention leads to inefficient outcomes.
It is unprofitable and the government must bail out firms that are bankrupted by collusion.
It leads to greater production than would occur in a competitive market.

QUESTION 10
1. There have been two especially important shifts in how markets are defined in recent decades: one involves _________________ and the other involves _____________.
communication technologies; the Internet
technology; globalization
the Internet; technology
globalization; communication technologies

QUESTION 11
1.A merger will likely lessen competition if
less concentration in the market results.
both b and c above are correct answers.
they are very beneficial to consumers.
it enables the new single firm to raise price.

QUESTION 12
1. The term _______________ is used to describe circumstances where government takes over ownership of a business.
deregulation
regulatory capture
nationalization
privatization

QUESTION 13
1. Government passed the ______________________ to limit the power of large, consolidated firms that were run by trustees as if they were a single firm.
Antitrust Act in 1890
Thatcher Act in 1980
Competition Act in 1980
Sherman Act in 1890

QUESTION 14
1. The FTC and the Department of Justice guidelines state that, in the US market-driven economy, firms will be forbidden to
agree to rig bids or allocate lines of commerce.
refuse to share customers, suppliers or territories.
agree to let the market set prevailing prices or output.
refuse to share or divide markets.

QUESTION 15
1. Which of the following poses a difficult challenge for U.S. competition policy?
monopoly
natural monopoly
perfect competition
monopolistic competition

QUESTION 1 1. Which of the following is not true about advertising...