Chapter 4

Question 1

When managers of oligopolies work together to limit the quantity of goods available in the market and create a shortage, they can unfairly destroy smaller competitors by

-price-fixing.
-bid rigging.
-manipulating supply.
-exclusive dealing arrangements.

Answer 1

manipulating supply

Question 2

Which of the following models results in just outcomes, respects moral rights, and satisfies utilitarianism?

-Pure monopoly
-Equilibrium point
-Oligopoly
-Perfect market competition

Answer 2

Perfect market competition

Question 3

When every seller finds a willing buyer, and every buyer finds a willing seller, what has been achieved?

-Equilibrium
-Utility
-Positive demand
-Marginal utility

Answer 3

Equilibrium

Question 4

Which of the following is considered to be the single most important piece of antitrust legislation in the United States today?

-The Interstate Commerce Act of 1887
-The Sherman Antitrust Act of 1890
-The Tobacco Trust Act of 1908
-The Clayton Act of 1914

Answer 4

The Sherman Antitrust Act of 1890

Question 5

Which of the following is an aspect of a monopoly market?

-There are reduced barriers to entry in the market.
-The supply and demand curves do not reach equilibrium.
-Additional resources are added to the market to counter shortages.
-One dominant seller has a substantial market share.

Answer 5

One dominant seller has a substantial market share

Question 6

In an imperfectly competitive market, having a few dominant sellers will create

-a monopoly.
-anticompetitive practices.
-perfect competition.
-an oligopoly.

Answer 6

an oligopoly

Question 7

Which of the following is a key interpretation of Section 2 of the Sherman Antitrust Act?

-All monopolies are illegal and must be broken up.
-A monopoly cannot use its power to maintain its monopoly.
-A current monopoly can extend its monopoly into other markets.
-A company cannot acquire a monopoly by buying another company.

Answer 7

A monopoly cannot use its power to maintain its monopoly

Question 8

Which of the following occurs when managers in an oligopoly market agree in advance which company will submit a winning proposal for a product or service being offered to a buyer?

-Exclusive dealing arrangements
-Predatory pricing
-Retail maintenance agreements
-Big rigging

Answer 8

Bid rigging

Question 9

Which of the following is one of the main ideas behind the do-nothing viewpoint of an oligopoly power?

-Economies of scale are good for business.
-Concentration leads to interdependence among companies with little price competition.
-There is a positive correlation between concentration and profitability.
-Regulation should be set up to control the activities of large corporations.

Answer 9

Economies of scale are good for businesses

Question 10

Which of the following prohibits price discrimination, exclusive contracts, tying arrangements, and mergers between companies that may substantially lessen competition?

-The Interstate Commerce Act of 1887
-The Sherman Antitrust Act of 1890
-The Tobacco Trust Act of 1908
-The Clayton Act of 1914

Answer 10

The Clayton Act of 1914

Question 11

The ability of a monopoly to charge high prices and reap high profits is a violation of

-supply and demand.
-capitalist justice.
-imperfect competition.
-utility.

Answer 11

capitalist justice

Question 12

Monopolies can charge prices well above the supply curve, and even above equilibrium price. Why don’t other producers enter the market when prices are above equilibrium?

-The price will fall to equilibrium, making profits unattainable.
-The monopolizing company will cut prices to drive out new competition.
-There are barriers to entry that make it virtually impossible to enter the market.
-It will be more difficult to establish a strong customer base.

Answer 12

There are barriers to entry that make it virtually impossible to enter the market

Question 13

Which of the following is achieved when the supply and demand curves for an item meet and cross?

-Marginal utility
-Equilibrium
-Imperfect competition
-Surplus

Answer 13

Equilibrium

Question 14

Which of the following bests describes oligopoly markets?

-They are highly concentrated markets.
-There are very few barriers to entry.
-There is one significant seller supported by less dominant sellers.
-They have little ability to influence the market or prices.

Answer 14

They are highly concentrated markets

Question 15

In a monopoly market, quantities can be set at less than the equilibrium amount, and prices are set

-at equilibrium.
-above equilibrium.
-below equilibrium.
-at rates determined by the government.

Answer 15

above equilibrium

Question 16

Keeping resources out of monopoly markets where shortages show more products are needed, and diverting resources to markets without a shortage violates which ethical principle?

-Capital justice
-Negative rights
-Supply and demand
-Utilitarianism

Answer 16

Utilitarianism

Question 17

Which of the following indicates a principle that states the more of an item a person consumes, the less satisfying each additional item becomes?

-Imperfect competition
-Increasing marginal costs
-Diminishing marginal utility
-Equilibrium point

Answer 17

Diminishing marginal utility

Question 18

Which of the following is an outcome of a monopoly market?

-Resources are used in ways that produce shortages, causing prices to be higher.
-Demand increases because of the scarcity of ownership.
-Prices are set below equilibrium and profit is made on volume, not cost levels.
-A perfectly competitive free market is achieved.

Answer 18

Resources are used in ways that produce shortages, causing prices to be higher

Question 19

In a perfectly competitive free market, what is the outcome when benefits and burdens are shared and individuals are paid based on the value of contribution made to the organization?

-Capitalist justice
-Marginal utility
-Equilibrium
-Price-fixing

Answer 19

Capitalist justice

Question 20

In a perfectly competitive market, when do prices achieve capitalist justice for the seller?

-At the equilibrium point
-On the demand curve
-On the supply curve
-When utility is gained

Answer 20

On the supply curve

Question 21

According to J. Fred Weston, which of the following is a basic assumption of the antitrust view of oligopoly power?

-Concentration leads to less interdependence and price competition among companies.
-Concentration helps to ensure product differentiation leading to less need for advertising.
-There is a negative correlation between concentration and profitability.
-Concentration is due mostly to mergers, and a high degree of concentration is unnecessary.

Answer 21

Concentration is due mostly to mergers, and a high degree of concentration is unnecessary

Question 22

Which of the following views of oligopoly power holds that economies of scale will be lost if firms are broken up or limited in size?

-The regulation view
-The antitrust view
-The do-nothing view
-The trust-buster view

Answer 22

The regulation view