ECO204 Quizzes Week 4 Quiz

Question 1

What kind of profits are a signal for firms to move in or out of an industry?

accounting

capital

operating

Correct Answer

economic

The answer can be found in Chapter 9, Section 9.5, What’s So Great About Perfect Competition?

Question 2

If the price of a good were greater than its marginal cost (P > MC), consumers would be __________.

willing to pay a lower price than it costs to produce another unit of the good

unwilling to pay as much as it costs to produce another unit of the good

Correct Answer

willing to pay a higher price than it costs to produce another unit of the good

willing to consider substitute goods at lower prices than the cost of the good

The answer can be found in Chapter 9, Section 9.5, What’s So Great About Perfect Competition?

Question 3

__________ products is another term for perfect substitutes.

Correct!

Homogenous

Assorted

Heterogeneous

Preferred

Question 4

Ludville’s Stardust Movie Theater is the only movie theater within 85 miles of Ludville. What kind of monopoly does the Stardust Movie Theater represent?

an illegal monopoly

Correct Answer

a natural monopoly

a virtual monopoly

an artificial monopoly

The answer can be found in Chapter 10, Section 10.2, Profits and Barriers to Entry.

Question 5

All of the following are artificial barriers that a monopoly can set up to stop firms from entering its industry EXCEPT __________.

purchasing the competition

underpricing the competition

exclusively owning the industry’s raw materials

Correct Answer

wielding influence over people’s opinions

The answer can be found in Chapter 10, Section 10.2, Profits and Barriers to Entry.

Question 6

In a microeconomic context, price discrimination means __________.

higher prices for individuals who look like they can afford it

higher prices for military personnel and government workers

different prices depending on race, gender, or national origin

Correct!

different prices for different types of consumers to maximize profits

Question 7

What is a group of firms producing the same, or at least similar, products called?

a monopoly

an oligarchy

a corporation

Correct!

an industry

Question 8

For what purpose do economists use a concentration

ratio?

to measure the average economic success of all the firms in a market

to compare the percentage of an industry’s total sales to another industry’s total sales

Correct Answer

to measure the distribution of economic power among the top firms in a market

to compare, in fraction form, the smallest firm’s size to the largest firm’s size

The answer can be found in Chapter 11, Section 11.1, Industry Structure.

Question 9

Consider that there are five firms in one industry. Their market shares are 40%, 30%, 20%, 5%, and 5%, respectively. What would the Herfindahl Index for these firms be?

2,925

100%

95%

Correct!

2,950

Question 10

The conditions of entry into a firm affect that firm’s entire industry. For example, high barriers to entry result in a __________ industry.

less concentrated

Correct Answer

more concentrated

less profitable

more biased

The answer can be found in Chapter 11, Section 11.1, Industry Structure.