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Multiple choice questions

1. Which of these relations is correct?
A) APC - APS = 1 B) MPC + MPS = 1 C) APC + MPC = 1 D) 1 + MPC = MPS
2. If supply increases and demand remains unchanged, equilibrium quantity will _______ and equilibrium price will ______________.
A) rise, rise B) fall, fall C) fall, rise D) rise, fall
3. Oligopolies that produce identical products such as steel have
A) no control over the price of their product because of the availability of perfect substitutes.
B) no control over the price of their product because of the large number of buyers in the market.
C) some control over the price of their product because each firm sells a substantial share of the market.
D) some control over the price of their product because of the small number of buyers in the market.
4. As price declines, quantity demanded goes _______ and quantity supplied goes ________.
A) up, up B) down, down C) up, down D) down, up
5. The conventional merger is the ____ merger.
A) horizontal B) vertical C) conglomerate D) diversifying
6. An increase in supply means that quantity supplied rises
A) at least one price. B) at a few prices. C) at most prices. D) at all prices.
7. The market price ____________ the equilibrium price.
A) can be higher than, but never lower than C) can be higher than, or lower than
B) can be lower than, but never higher than D) is always equal to
8. A merger between Chase Bank and Citibank would be a ____ merger.
A) horizontal B) vertical C) conglomerate D) diversifying
9. To build up our capital we need to
A) save more and consume more. C) save less and consume less.
B) save more and consume less. D) save less and consume more.
10. In the United States investment is done
A) entirely by the government.
B) mostly by the government.
C) about half by the government and half by private enterprise.
D) mainly by private enterprise.
11. Specific business practices such as price discrimination are prohibited by the:
A) Clayton Act of 1914. B) Sherman Act of 1890. C) Federal Trade Commission Act of 1914.
12. Which statement is false?
A) A monopoly is both a firm and an industry. C) There are no monopolies in the United States.
B) A monopoly is an imperfect competitor. D) None of these statements is false.
13. Price discrimination
A) occurs whenever a good or service is resold.
B) is prohibited by law.
C) occurs when a seller charges two or more prices for the same good or service.
D) occurs when the seller charges different prices for different quality products.
14. Which statement is true?
A) All monopolies are good.
B) All monopolies are bad.
C) Most natural monopolies are government regulated or government owned.
D) None of these statements is true.
15. Monopolistic competition differs from perfect competition only with respect to
A) the number of firms in the industry. C) barriers to entry.
B) product differentiation. D) economies of scale.
16. Each of these companies was broken up by the Supreme Court except
A) AT&T. B) the American Tobacco Trust. C) the Standard Oil Trust. D) U.S. Steel.
17. Which statement is false?
A) Monopolies tend to be inefficient.
B) Economic power is easily translated into political power.
C) Two ways of preventing public utilities from taking advantage of their power are government regulation and government ownership.
D) None is false.
18. Which statement is false?
A) Oligopolies are illegal in most states. C) Ford Motor Company is an oligopoly.
B) Most oligopolies engage in outright collusion. D) None of these statements is false.
19. Which of the following is NOT an example of a vertical merger?
A) The merger of a shoe producer and a leather producer
B) The merger of two computer companies
C) The merger of a computer company and a microelectronics chip company
D) The merger of an automobile company and a tire company
E) The merger of a brewery and a producer of hops
20. In the United States, natural monopolies
A) are easily converted to competitive industries. C) are commonly regulated by governments.
B) are common in retailing. D) are rarely regulated by governments.

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