Real Questions From Past Exams (No Answers)

Below is a list of sample questions from previous exams. No answers are provided. Youcan test your level of confidence with the material by attempting to answer each question then rating howcertain you are that you got the correct answer. 1. "Monopolists and perfectly competitive firms both take market prices as given." Is this statement true or false? A. True B. False 2. "Monopolists get to choose prices, but perfectly competitive firms must take market prices as given." Is this statement true or false? A. True B. False 3. Refer to the following figure describing a monopolist: This monopolist will produce _________ units and charge a price of $_____ per unit. The monopolist’s per unit costs will be $________. This means the firm will earn $______ in profits on each unit and $_______ in total profits. 4. How are monopolistically competitive firms similar to monopolies? A. Like monopolies, they brand their product and spend considerable sums on advertising. B. They choose price and quantity in the same way that monopoly firms do in the short run. C. They let the market choose the price of the product in the same way monopoly firms do in the short run. D. Like monopolies, they produce a unique product with no close substitute. 5. Refer to the following figure for a profit-maximizing monopolistically competitive firm: According to the figure, this firm will produce _____ units and charge a price of $_____ per unit. The result will be positive profits, meaning we can expect firms will __________________ in the long run. 6. “Unlike economic profits in perfectly competitive industries, economic profits in monopolistically competitive industries will be positive in the long run.” Is this statement true or false? A. True B. False 7. A monopoly firm uses ____ to set the price of their product. A. the prevailing market price B. average total costs C. the market demand curve D. average fixed cost E. None of the above. 8. Firms in monopolistically competitive industries… A. produce branded/differentiated products. B. have very large market shares. C. cannot easily enter or exit the industry. D. set their prices at the prevailing market price. E. None of the above. 9. “Prices in perfectly competitive industries tend to be lower than prices in monopoly industries.” Is this statement true or false? A. True B. False 10. Two firms in industry Z are merging. Before the merger, the HHI for industry Z was 2350. After the merger, the HHI is 3500. Would the Justice Department investigate this merger? A. Yes B. No 11. How many firms share the market in a duopoly? __________ 12. Mergers that would result in one firm having excessive market power are challenged by... A. The Justice Department B. The Central Bank C. The Department of Commerce D. The Environmental Protection Agency 13. "Concentration ratios are more informative than the HHI when it comes to evaluating oligopoly." Is this statement true or false? A. True B. False 14. “Cartels are generally legal in the US.” Is this statement true or false? A. True B. False 15. Refer to the following table: Firm Firm Co. Business Inc. Company Inc. Management Ltd. Shop Co. Retail & Partners Market Share 6% 15% 6% 31% 7% 24% Business & Shops 4% Money Inc. 4% Profit Co. 3% Based on the table, we can describe this market as... A. A monopoly. B. A duopoly. C. A dominant group with a competitive fringe. D. A perfectly competitive market. 16. Refer to the table from question 15. The CR-4 for this industry is __________. 17. “Economies of scale can result in an industry with just a few large firms serving the entire market.” Is this statement true or false? A. True B. False 18. “Vertical integration (merging with another firm at an earlier or later production stage) cannot lead to an oligopoly in an industry.” Is this statement true or false? A. True B. False 19. Firms in oligopolistic markets ____. A. earn zero profits in the long run due to high barriers to entry B. take the reactions of competitors into account when making price and output decisions C. maximize profits by setting price equal to marginal cost D. have no control over the price of their product 20. Which of the following best describes a horizontal merger? A. Two mobile phone service firms merge. B. A computer firm merges with an internet provider. C. A smartphone maker merges with the firm that makes their microchips. D. An electronics firm merges with a snack foods firm. 21. "Theodore Roosevelt was a robber baron." Is this statement true or false? A. True B. False 22. When a negative externality is present, social costs are __________ private costs. 23. When students listen to loud music in the dorm, they annoy other students living in the surrounding area. What type of externality is this? A. Negative production externality. B. Negative consumption externality. C. Positive production externality. D. Positive consumption externality. 24. “When a negative externality is present, the market provides too little of the good.” Is this statement true or false? A. True B. False 25. When a positive externality is present,… A. social benefit > social cost. B. social benefit > private benefit. C. private benefit > private cost. D. social benefit = private benefit. 26. Refer to the following figure (right). Which tool could the government use to correct the market shown in the figure above? A. Levy a tax. B. Prohibit the sale of the product. C. Offer a subsidy. 27. "Common property resources tend to be over-used." Is this statement true or false? A. True B. False 28. Public goods are ____________ (meaning you cannot prevent someone from consuming the product) and _____________ (meaning consuming the product doesn’t diminish it for others. Club goods are also _____________. But unlike public goods, club goods are __________. 29. Briefly describe how the government tries to reduce the tragedy of the commons. _____________________ _______________________________________________________________________________________ _______________________________________________________________________________________ 30. Briefly describe ONE problem the government faces when they provide public goods to people. _______________________________________________________________________________________ _______________________________________________________________________________________ 31. _______ is an example of a common property resource. A. Gasoline B. An amusement park C. An aerial fireworks display D. Fish in the wild