Question

chapter 7 test, form a cont. market structures

1. in the economic term oligopoly, the word part olig - probably means

a \few\
b. \single\
c. \all\
d. \one\

1. pure competition and monopoly

a. are the same
b. are almost the same
c. should not be compared
d. are opposites

1. which of the following factors contribute to market failure?

a adequate competition
b. knowledge of prices and opportunities
c. mobility of resources
d. inadequate competition

1. which is an example of a public good?

a. a rock band
b. a car
c. the army
d. bread

1. when a factory pollutes a river, the resulting water pollution is an example of a

a. technological monopoly
b. public good
c. negative externality
d. neutral spillover effect

1. how would an economist characterize a local government increasing property taxes to improve the school system?

a. laissez - faire in action
b. an example of collusion
c. a cease and desist order
d. subsidizing a positive externality

1. the sherman act, the clayton act, and the federal trade commission act were all designed to

a. ensure competition
b. promote trusts
c. create public goods
d. extend mortgages

1. a woman borrows money from a bank to purchase a house. she promises to give the bank the house if she cannot repay the loan. this woman has signed a

a. foreclosure
b. mortgage
c. trust
d. cease and desist order

1. we say the united states has a \modified\ free enterprise economy because almost everything we do and everything we buy is in some way affected by

a. business
b. money
c. government
d. inventors

Explanation:

1. In an oligopoly, there are a few large - firms dominating the market, so "olig -" means "few".
2. Pure competition has many firms and no market power for any single firm, while monopoly has one firm with complete market power. They are opposites.
3. Inadequate competition can lead to market failure as firms may have market power to distort prices and output.
4. Public goods are non - excludable and non - rivalrous. The army is a public good as it protects everyone and one person's use doesn't reduce its availability for others.
5. When a factory pollutes a river, it imposes a negative cost on society (negative externality) as others bear the cost of the pollution.
6. Increasing property taxes to improve the school system is subsidizing a positive externality (education has positive spillover effects on society).
7. These acts were designed to prevent monopolies and promote competition.
8. A mortgage is a loan where the borrower pledges the property (house) as collateral.
9. The US has a modified free - enterprise economy because the government plays a significant role in regulating and influencing economic activities.

Answer:

1. A. "few"
2. D. are opposites
3. D. inadequate competition
4. C. the army
5. C. negative externality
6. D. subsidizing a positive externality
7. A. ensure competition
8. B. mortgage
9. C. government