1. The difference between a perfectly competitive firm and a monopolistically competitive firm is that a monopolistically competitive firm faces a: horizontal demand curve and price equals marginal cost in equilibrium.
horizontal demand curve and price exceeds marginal cost in equilibrium.
downward-sloping demand curve and price equals marginal cost in equilibrium.
downward-sloping demand curve and price exceeds marginal cost in equilibrium.
2. A market has the following characteristics: there are many firms, few barriers to entry, each firm acts independently with differentiated products, and no possible long-run economic profit. This market is:
a monopoly.
an oligopoly.
monopolistically competitive.
perfectly competitive.
3. In the NAICS classification system, the broadest classification would be a:
two-digit industry.
three-digit industry.
four-digit industry.
five-digit industry.
4. A public good is:
any good traded in markets.
a good that is nonexclusive and nonrival.
a good provided only to those who pay for it.
rarely provided by government.
5. In which of the following models of firm behavior do firms charge a competitive price, while still emphasizing the importance of barriers to entry and exit?
Cartel model of oligopoly.
Contestable market model of oligopoly.
Perfectly competitive model.
Monopoly model.
5. The central characteristic of oligopolistic industries is:
interdependence of pricing decisions.
identical products.
price competition.
few or no economies of scale.
6. Government failure occurs when:
government fails to implement policy designed to correct a market failure.
government intervention in the market to improve a market failure succeeds.
government intervention in the market to correct a market failure actually makes things worse.
there is no need for government intervention into the market because there is no market failure.
7. The existence of negative externalities:
prevents the market from working efficiently.
prevents government from intervening in the marketplace.
causes the market to work more effectively.
means that marginal private costs equal marginal social costs.