Question Question 1. Which of the following is an example of a barrier to entry?

Question
1. Which of the following is an example of a barrier to entry?
a. Dawn charges a higher price than her competitors for her landscape-architecture services.
b. Rhianna obtains a copyright for a short story that she wrote and published.
c. Debbie offers free samples of her chocolate chip cookies to attract new customers.
d. Bev charges a lower price than her competitors for her desktop-publishing services.

2. When a firm operates under conditions of monopoly, its price is
a. not constrained.

b. constrained by marginal cost.

c. constrained by demand.

d. constrained only by its social agenda.

3. Which of the following statements is correct?

a. Panel C represents the typical demand curve for a perfectly competitive industry.
b. Panel B represents the typical demand curve for a monopoly.

c. Panel B represents the typical demand curve for a perfectly competitive firm.
d. All of the above are correct.

4. Sally owns the only shoe store in town. She has the following cost and revenue information.

Sally will maximize her profits by selling

a. 3 pairs of shoes.
b. 4 pairs of shoes.
c. 6 pairs of shoes.
d. 7 pairs of shoes.

5. The social cost of a monopoly is equal to its
a. economic profit.

b. fixed cost.

c. dead weight loss.
d. variable cost.

6. A firm operating in a monopolistically competitive market can earn economic profits in
a. the short run but not in the long run.

b. the long run but not in the short run.

c. both the short run and the long run.

d. neither the short run nor the long run.

7. When a new firm enters a monopolistically competitive market, the individual demand curves faced by all existing firms in that market will
a. shift to the left.

b. shift to the right.

c. shift in a direction that is unpredictable without further information.
d. remain unchanged. It is the supply curve that will shift.

8. The figure is drawn for a monopolistically-competitive firm.

Efficient scale is reached

a. at 100 units.

b. at 133.33 units.

c. between 133.33 units and 154.92 units.

d. at 154.92 units.

9. Economists John Kenneth Galbraith and Friedrich Hayek disagreed about the roles of advertising and government. Which of the following is correct?
a. Galbraith thought advertising artificially enhanced consumers’ desires for private goods, while Hayek thought no producer could “determine” consumers’ tastes though advertising.
b. Galbraith believed in enhancing personal freedoms, while Hayek advocated larger government.
c. Galbraith thought advertising was a waste of resources because it did not influence consumers, while Hayek thought advertising was powerful enough to “determine” consumers’ tastes.
d. Galbraith believed that the government should not interfere in markets, while Hayek believed that there was insufficient government regulation of marketing.

10. According to one theory, advertising sends a signal to consumers about the quality of the product being offered. An implication of this theory is that
a. the actual quality of the product is irrelevant.

b. the content of the advertisement is irrelevant.

c. advertising is not in the best interest of society.

d. it is irrational for firms to pay famous people large amounts of money to appear in their advertisements.

11. Firms that spend a large amount of money on advertising a particular product are likely to be providing consumers with
a. information about the availability of the product.
b. information about product price.

c. a signal of product quality.

d. a good example of wasted resources.

12. A firm can earn economic profits in the short run
a. only when the market is perfectly competitive.

b. only when the market is a monopoly or monopolistically competitive.
c. only when the market is monopolistically competitive or perfectly competitive.
d. when the market is perfectly competitive, monopolistically competitive, or monopolistic.

13. As the number of firms in an oligopoly market
a. decreases, the price charged by firms likely decreases.

b. decreases, the market approaches the competitive market outcome.
c. increases, the market approaches the competitive market outcome.
d. increases, the market approaches the monopoly outcome.

14. For cartels, as the number of firms (members of the cartel) increases,
a. the monopoly outcome becomes more likely.

b. the magnitude of the price effect decreases.

c. the more concerned each seller is about its own impact on the market price.
d. the easier it becomes to observe members violating their agreements.

15. The table shows the town of Driveaway’s demand schedule for gasoline. Assume the town’s gasoline seller(s) incurs a cost of $2 for each gallon sold, with no fixed cost.

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