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Eco 09

True/False
Indicate whether the sentence or statement is true or false.
 

1. 

Competition is advantageous because it provides consumers with choices.
 

2. 

The most common market structure in the United States is perfect competition.
 

3. 

In a perfectly competitive market, buyers control the price.
 

4. 

An increase in available information about prices and quality makes an economy more competitive.
 

5. 

The agriculture industry in the United States is an example of almost perfect competition.
 

Multiple Choice
Identify the letter of the choice that best completes the statement or answers the question.
 

6. 

In perfect competition, prices are controlled by
a.
supply and demand.
c.
buyers.
b.
sellers.
d.
government.
 

7. 

For perfect competition to take place, the goods being sold must
a.
have few buyers.
c.
be similar.
b.
have few sellers.
d.
be difficult to produce.
 

8. 

The increase of information available on the World Wide Web has
a.
not affected the economy.
c.
created perfect competition.
b.
made the economy more competitive.
d.
made the economy less competitive.
 

9. 

The industry in the United States that most closely approaches perfect competition is
a.
communications.
c.
transportation.
b.
mining.
d.
agriculture.
 

10. 

How does perfect competition affect society?
a.
consumers overpay for products they buy
b.
consumers cannot buy the products they want
c.
industries are economically inefficient
d.
prices are forced down to cover the costs of production plus a small profit
 

11. 

The most extreme form of imperfect competition is
a.
oligopoly.
c.
monopolistic competition.
b.
cartel.
d.
pure monopoly.
 

12. 

Which of the following is a characteristic of a pure monopoly?
a.
many sellers of the good or service
b.
many substitutes for the good or service being sold
c.
only one seller of the good or service
d.
no barriers to entry
 

13. 

A company with exclusive rights to provide a public good or service is a
a.
natural monopoly.
c.
technological monopoly.
b.
geographic monopoly.
d.
government monopoly.
 

14. 

In which of the following market structures is advertising most important?
a.
pure monopoly
c.
monopolistic competition
b.
oligopoly
d.
cartel
 

15. 

In monopolistic competition,
a.
businesses compete by product differentiation and advertising.
b.
there is only one seller of the good or service.
c.
each seller sells exactly the same product.
d.
sellers have no control over prices.
 

16. 

One goal of government in the United States has been to
a.
protect monopolies.
b.
encourage competition in the economy.
c.
promote mergers.
d.
discourage competition in the economy.
 

17. 

The practice of creating interlocking directorates
a.
increased competition among corporations.
b.
was ended by John D. Rockefeller.
c.
forced monopolies to break up.
d.
was outlawed by the Clayton Act.
 

18. 

Most antitrust legislation restricts the harmful effects of
a.
competition.
c.
advertising.
b.
mergers.
d.
trade.
 

19. 

A paper company merging with an office supply company is an example of a(n)
a.
interlocking directorate.
c.
horizontal merger.
b.
conglomerate.
d.
vertical merger.
 

20. 

Which federal regulatory agency regulates the sale of stocks, bonds, and other investments?
a.
Securities and Exchange Commission
c.
Food and Drug Administration
b.
Department of the Treasury
d.
Federal Trade Commission
 

Completion
Complete each sentence or statement.
 

21. 

A ____________________ is an arrangement among groups of industrial businesses to reduce international competition by controlling price, production, and distribution of goods.
 

 

22. 

Government regulations, large initial investment, and ownership of raw materials are ____________________.
 

 

23. 

The most common form of market structure in the United States is _________________________.
 

 

24. 

A ____________________ gives an inventor a technological monopoly over an invention.
 

 

25. 

____________________ make it possible for natural monopolies to produce the largest amount for the lowest cost.
 

 

26. 

Laws enacted to prevent new monopolies from forming and to break up those that exist are known as ____________________.
 

 

27. 

Corporations that are involved in at least four or more unrelated businesses are called ____________________.
 

 

28. 

The Federal Trade Commission is the ____________________ that regulates product warranties, unfair methods of competition in interstate commerce, and fraud in advertising.
 

 

29. 

____________________ is the gradual reduction in government control over business activity.
 

 

30. 

The federal government outlawed _________________________ among corporations.
 

 

Matching
 
 
Match each item with the correct statement below.
a.
market structure
b.
perfect competition
c.
large market
d.
easy entry and exit
e.
equilibrium price
 

31. 

situation in which numerous buyers and sellers exist for a product
 

32. 

only price at which quantity demanded equals quantity supplied
 

33. 

situation in which the initial costs of investment are small
 

34. 

market situation in which no single buyer or seller can affect price
 

35. 

extent to which competition prevails in particular markets
 
 
Match each item with the correct statement below.
a.
monopoly
b.
patent
c.
copyright
d.
oligopoly
e.
cartel
 

36. 

industry dominated by a few suppliers who exercise some control over price
 

37. 

arrangement among groups of industrial businesses to reduce international competition
 

38. 

author's right to sell, publish, or reproduce his or her works for a specified number of years
 

39. 

market situation in which a single supplier makes up an entire industry
 

40. 

inventor's exclusive right to make, use, or sell an invention for a specified number of years
 
 
Match each item with the correct statement below.
a.
interlocking directorate
b.
antitrust legislation
c.
merger
d.
conglomerate
e.
deregulation
 

41. 

combined company that results when one corporation buys more than half the stock of another corporation
 

42. 

large corporation made up of smaller corporations dealing in unrelated businesses
 

43. 

reduction of government control over business activity
 

44. 

board of directors with members who also serve as the board of directors of a competing corporation
 

45. 

laws that prevent new monopolies from forming and break up those that exist
 



 
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