True/False
Indicate whether the
statement is true or false.
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1.
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Market situations lacking one or more of the characteristics of perfect
competition are called imperfect competition.
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2.
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Perfect competition requires a market structure with freedom for firms to enter
or leave the market.
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3.
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Oligopoly is a market structure with one very large firm.
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4.
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“Truth in advertising laws” are designed to prevent market failures
caused by inadequate information.
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5.
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The U.S. government intervenes in the economy to reduce the costs of imperfect
competition.
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6.
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The Clayton Antitrust Act was the first significant law against monopolies in
the United States.
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7.
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The government can “internalize an externality” by using the tax
system.
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8.
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A condition of perfect competition is characterized by product
differentiation.
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9.
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The monopolistic competitor operates in a market with many well-informed buyers
and sellers.
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10.
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Non-price competition is the use of advertising, giveaways, and other
promotional campaigns to win customers.
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11.
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Smaller firms have the advantage of economies of scale over larger firms.
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12.
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Market failure can occur when resources do not move freely from one industry to
another.
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13.
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Economists describe an unintended side effect of a business activity as an
externality.
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14.
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An example of a public good is a home computer.
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15.
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The United States government uses taxes to reduce the effects of negative
externalities.
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16.
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Corporations selling stock to the public must disclose their financial and
operating information to both the public and the Securities and Exchange Commission.
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Multiple Choice
Identify the
choice that best completes the statement or answers the question.
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17.
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Perfect competition is characterized by all of the following EXCEPT
a. | a large number of buyers and sellers. | c. | sellers acting together to set
prices. | b. | identical products. | d. | well-informed buyers and sellers. |
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18.
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A monopoly that is based on the ownership or control of a manufacturing method,
process, or other scientific advance is a
a. | geographic monopoly. | c. | government monopoly. | b. | natural monopoly. | d. | technological
monopoly. |
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19.
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The Sherman Antitrust Act
a. | outlawed restraints and monopolies that hindered trade. | b. | nationalized the
railroads. | c. | established the FDA. | d. | applied only to
banking. |
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20.
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The government is involved in the U.S. economy for all of the following reasons
EXCEPT to
a. | promote and encourage competition. | b. | prevent monopolies that deny the public the
benefits of competition. | c. | regulate industries in which a monopoly is in
the public interest. | d. | promote the development of market
externalities. |
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21.
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When a major car company lowers its prices, other car makers will
probably
a. | maintain existing prices. | c. | go out of
business. | b. | raise their prices. | d. | lower their prices. |
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22.
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Indirectly, the government has improved the quality of information available to
consumers through
a. | the SEC. | b. | its support for the
Internet. | c. | the Federal Reserve System. | d. | requiring content labels on food
products. |
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