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    1. T / F The opportunity cost of producing product X is the amount of product Y that we could have been produced instead.

    2. T / F Variable costs are defined as costs that vary with output.

    3. T / F Usually the demand for necessities is more price elastic than is the demand for luxury goods.

    4. T / F In the long run, all resource inputs and costs are variable.

    5. T / F The international oil industry is not an example of an oligopoly.

    6. T / F Anti-trust policies are designed to promote competition.

    7. T / F Usually the larger the number of members in an oligopoly, the more difficult price fixing is.

    8. T / F The women's dress business is an example of monopolistic competition.

    9. T / F Firms that have a monopoly always earn excessive profits.

    10. T / F Democrats tend to promote weaker anti-trust policy than Republicans.

    11. T / F A price ceiling is a government set maximum price for things like rent controls.

    12. T / F Price discrimination is when a company sells different products for the same price.

    13. T / F A conglomerate is a firm with a number of unrelated lines of business.

    14. T / F If two goods are substitutes, a decline in the price of one will cause an increase in the demand for the other.

    15. T / F A horizontal merger would be between two drug companies, so the combined firm would have a wider range of products to sell.

    16. T / F An increase in the supply of product X, with demand held constant, will increase the price of product X.

    17. T / F A horizontal firm is one that operates in a lot of different industries.

    18. T / F A big problem with agricultural markets is when all farmers have a bountiful crop prices crash.

    19. T / F Maintaining a legal system to enforce contracts is an economic function of government.

    20. T / F If a product or service is price elastic, a price reduction will increase gross revenues.

    21. T / F Inferior goods are those we'd buy more of if our income dropped and we had to save money.

    22. T / F A conglomerate firm is one that operates in a lot of different industries.

    23. T / F An example of compliments would be air travel and book sales at airports.

    24. T / F Externalities are not things like pollution

    25. T / F Price fixing by companies is illegal in the USA.

    1. With the higher prices for gasoline and airfares, will Americans cut back on spending? If they do, what will they cut? Driving? Vacations? Some other expenses?

    2. In many industries, such as supermarkets, banks, cell phone companies, etc., because of mergers our choices as consumers are reduced to two or three competitors. Do you think this is good for the economy? What are some of the reason why mergers happen? Should the government do something about this?

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