Chapter 7 Market Structures - DOC by malj

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									Qtr 2 Test 1 2010
MI 4
PF 1-3
1. What is monopolistic competition?
     a. one company selling the identical product under different names
     b. a very few companies selling identical products
     c. one company selling several different products under different names
     d. many companies selling similar but not identical products

2. What happens to a monopolistically competitive firm that begins to charge an
   excessive price for its product?
      a. The firm will go out of business.
      b. The government will regulate the price.
      c. Consumers will boycott the product.
      d. Consumers will substitute a rival’s product.

3. What is the definition of an oligopoly?
     a. two to four firms producing 70 percent to 80 percent of the output
     b. one firm producing 95 percent of the output
     c. eight to ten firms producing 60 percent to 70 percent of the output
     d. eight to ten firms producing 90 percent of the output

4. How much control over price do companies in a perfectly competitive market have?
     a. none                                    c. some
     b. very little                             d. total control

         Monopolistic Competition                       Perfect Competition
Many firms                                   Many firms
Some variety of goods (differentiation)      No variety of goods
Low barriers to entry                        No barriers to entry
Little control over prices (price takers)    No control over prices (price takers)

5. The characteristic that makes Monopolistic Competition the most closely related to
   Perfect Competition is
       a. Control over prices
       b. Barriers to market entry
       c. Number of firms
       d. Variety of goods

                 Oligopoly                                   Monopolies
few firms dominate                           1 firm
Some variety of goods (differentiation)      No variety of goods
High barriers to entry                       High barriers to entry
Some control over prices (price makers)      Complete control over prices (price takers)
Qtr 2 Test 1 2010
MI 4
PF 1-3

6. Oligopolies and Monopolies differ most in which categories?
      a. Control over prices
      b. Barriers to market entry
      c. Taxes
      d. Government spending

7. The market structure most likely to be considered “price takers” is
      a. Perfect competition
      b. Monopoly
      c. Oligarchy
      d. Monopoly

8. Jerome decided to open a carwash business in his neighborhood. His funds were
   limited so he had no other choice but to start small, by providing his own vacuum
   cleaner. The hand car wash business would be categorized as which of the
   following?
       a. Monopoly
       b. Oligarchy
       c. Monopoly
       d. Perfect competition

   Grant’s Amoco Station
   Edna’s BP Station
   Quick Trip

9. Each of the above gas stations would best be described as
      a. Monopoly
      b. Oligarchy
      c. Monopolistic Competition
      d. Perfect competition

   GA Power
   Atlanta Water Supply
   Walton EMC

10. Each of the following would best be described as
    a. Monopoly
    b. Oligarchy
    c. Monopoly
    d. Perfect competition
Qtr 2 Test 1 2010
MI 4
PF 1-3
11. Which of the following is an advantage of a sole proprietorship?
      a. No one is responsible if it fails.
      b. It is easy to get financing to start one.
      c. It is an easy way to make a lot of money.
      d. It is the least-regulated form of business organization.

12. What percentage of businesses are sole proprietorships?
      a. 25 percent                                c. 55 percent
      b. 75 percent                                d. 40 percent

13. If a partnership fails, who is responsible for the debts?
         a. anyone who works for the partnership
         b. only the most senior general partner
         c. all of the partners
         d. no one

14. Why is it easier for a partnership to borrow money and to hold good employees than
    it is for a sole proprietorship to do so?
         a. The more limited access to a partner’s personal funds make the business more
             careful.
         b. The large number of partners makes it more likely that the business will be a
             success.
         c. The larger number of partners means that people are easier to get along with.
         d. A partnership has more personal stability and access to more money.

15. Which of the following is a disadvantage of a sole proprietorship?
      a. lack of permanence                         c. legal constraints
      b. high taxes                                 d. difficult to start up

16. The Law offices of Jackson, James and Jones in your neighborhood is probably an
    example of a
       a. corporation.                            c. cooperative.
       b. sole proprietorship                     d. partnership.

17. In a publicly held corporation
        a. stockholders rarely trade their stocks.
        b. stocks are not usually traded at stock exchanges.
        c. a large number of stockholders can buy and sell stock.
        d. family members are excluded from holding stock.
Qtr 2 Test 1 2010
MI 4
PF 1-3
18. Ellen started a catering business, but soon decided that catering was too stressful for
    her. She could close her business relatively easily and return to school because the
    business was a
        a. producer cooperative.                     c. general partnership.
        b. sole proprietorship.                      d. closely held corporation.

19. You are part-owner of NewBrands corporation because you
       a. have created a corporate charter for the company.
       b. own the company’s stock.
       c. have purchased company bonds.
       d. attend the company’s annual meetings.

20. Which of the following is a disadvantage of corporations?
      a. lack of permanence                        c. legal constraints
      b. low taxes                                 d. difficulty of start-up

21. (PF1A) What role does an incentive play in a market economy?
       a. Incentives lower the productivity levels of an economy
       b. Too many incentives cause inflation in the market.
       c. All people react differently to incentives, therefore incentives are ineffective.
       d. People react predictably to incentives by working harder and being more productive.

22. (PF1A) Jack’s net pay from his new job is $200.00. Jack plans to either buy a bike for his
    little brother for Christmas or fix his car and spend the money on a new battery and a tune-up.
    Which best explains why Jack will likely use the money to fix his car?
          a. The decision is profitable to him.
          b. The marginal benefit of fixing his car outweighs the marginal cost buying the bike.
          c. The marginal cost of buying the bike, outweighs the marginal benefit of fixing his car
          d. The opportunity cost associated with fixing his car has a minimal affect.

                    Jack’s Hourly Pay Scale
Options             Benefits          Opportunity Cost
Work 1 hour          $ 5.00   1 hour of study or recreation time
Work 2 hours        $ 10.00   2 hours of study or recreation time
Work 3 hours        $ 15.00   3 hours of study or recreation time
Work 4 hours        $ 20.00   4 hours of study or recreation time
Work 5 hours        $ 25.00   5 hours of study or recreation time

23. (PF1B) Jack’s class dues are due in two weeks. So far he has $25.00 saved. Considering
    Jack’s class dues total $200.00, the best decision he could make to earn the rest of the money
    and still have some study and recreational time for himself would be
        a. Working 5 Hrs a day for 7 days
        b. Working 2 Hrs a day for 10 days
        c. Working 4 Hrs a day for 9 days
        d. Working 4 Hrs a day for 10 days
Qtr 2 Test 1 2010
MI 4
PF 1-3
(Use the chart below for question 24)

Eleanor’s Goals      What she want         What it cost          Earnings and         When she can get
                                                                 Savings Options      it
Short Term           Prom Dress            $200                  Earn and save        10 weeks from
                                                                 20/week from         now
                                                                 babysitting
Intermediate         Summer College        $1200                 Working for Aunt     6 months from
                     Tour                                        Laura in her Law     now
                                                                 Firm on Weekends
Long Term            Used Car              $2000                 Working at           1 year for now
                                                                 Subway for
                                                                 minimum wage

24. (PF1B) Eleanor has created a goal sheet. Considering the options available for Eleanor, which
    choice allows her to prepare for her high school prom?
        a. Babysitting her neighbors son
        b. Working at her aunt’s law firm
        c. Asking her father for a loan
        d. Working at Subway
25. (PF1C) Elise plans to take a vacation next summer to Puerto Rico so that she can visit her family.
    Which of the following tools would do her the greatest amount of good to plan her trip?
            a. A checking account
            b. A savings account
            c. A budget
            d. A savings bond

26. (PF1C) A man has $100 to invest and hopes to receive 10 times the amount back ($1,000) by the end
    of 5 years. This could be BEST accomplished by
            a. purchasing $100 worth of stock in a start-up company
            b. placing the money in a savings and loan account
            c. depositing the money in a commercial bank account
            d. buying $50 worth of bonds and investing $50 in a mutual fund

27. (PF2A) If Simon wanted to get motorcycle loan at the lowest interest rate possible, he would most
    likely become a member of which of the following financial institutions?
             a. A bank of his choice.
             b. The savings and loan mortgage association
             c. A pay day loan company
             d. A credit union of his choice.

28. (PF2A) If Ramon wanted to enjoy the services of 24 hr ATM service, free checking, a savings
    account, and direct deposit, he could really use the services of
            a. A credit union of his choice.
            b. The savings and loan mortgage association
            c. A bank of his choice.
            d. A pay day loan company
 Qtr 2 Test 1 2010
MI 4
PF 1-3

29. (PF2B) Which of the following best explains the reason for interest charged and interest earned?
           a. Banks are non-profit institutions.
           b. Banks must pay more than they receive.
           c. Banks are profit-making institutions.
           d. There is no difference between interest charged and interest earned.

30. (PF2B) If a bank is offering a higher interest rate of return to investors, the impact on borrowers from
    the same bank is
           a. an increased interest rate.
           b. a decreased savings rate.
           c. an increased savings rate.
           d. a decreased interest rate.

31. (PF2C) Which best explains why certificates of deposits carry the lowest risk?
           a. Because customers are guaranteed to receive a high reward
           b. Because customers are guaranteed to receive a low reward
           c. Because customers are guaranteed to receive a generous reward
           d. Because customers are guaranteed to receive an average reward

(Use for question 32)




32. (PF2C) According to the diagram above, why do investors require higher returns for some
    investments?
           a. to compensate for less risk
           b. to invest less funds for less risk
           c. to compensate for greater risk
           d. to offset the amount of money invested

33. (PF2D) Which of the following best explains what speculative stocks and real estate have in
    common?
           a. When the risk is medium, the possibility of return is medium.
           b. When the risk is low, the possibility of return is high.
           c. When the risk is high, the possibility of return is low.
           d. When the risk is high, the possibility of return is high.
Qtr 2 Test 1 2010
MI 4
PF 1-3
34. (PF2D) Once Jerry’s son was born, he knew he had a duty to begin saving for his son’s college
    education. Considering Jerry’s son is still a newborn, the wisest investment option Jerry could use for
    his son’s education would be an investment in
            a. Stocks
            b. Mutual Funds
            c. Bonds
            d. Real Estate

35. (PF3A) Who is hurt most by unanticipated inflation?
           a. Speculators in gold and other precious metals.
           b. Savers at a fixed rate of interest.
           c. Workers with a union cost-of-living adjustment in their contracts.
           d. Borrowers at a fixed rate of interest.

36. (PF3A) Who benefits most from unanticipated inflation?
           a. Teachers who work on fixed monthly incomes.
           b. Workers with a union cost-of-living adjustment in their contracts.
           c. Savers at a fixed rate of interest.
           d. Borrowers at an adjustable rate of interest.


37. (PF3B) A sales tax on retail products, is considered
           a. Progressive tax.
           b. Corporation tax.
           c. Regressivel tax.
           d. Proportional tax.

38. (PF3B) Tax rates in which the percentage of tax increases as the level of income increases is MOST
    LIKELY
           a. A regressive tax
           b. A progressive tax
           c. Value–added tax
           d. Proportional tax

39. (PF3C) Of the following groups, who would be the most impacted by a sales tax increase?
          a. members of strong labor unions
          b. individuals living on fixed incomes
          c. people who do not have any debt
          d. employees who have received raises

40. (PF3C) Most economists believe that a sales tax increase affects which group the MOST?
           a. Teachers earning a salary
           b. Retired workers earning a pension
           c. Parents receiving non adjusted welfare
           d. The owner of the Atlanta Falcons

								
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