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1. A purely- or perfectly-competitive firm would be characterized by which of the following?

* A. Large number of firms, price taker, free entry and exit, and standardized product *

2. For a purely-competitive firm, price must be


* A. equal to marginal revenue and average revenue *

3. What will excessive or economic profits induce for a firm in any industry structure?
* A. entry into the market *

4. A pure-monopoly firm's demand curve is also the market demand curve. This kind of firm may successfully
engage in price discrimination to increase its total profit if it
* B. segregates its market into clearly definable groups of consumers with different elasticity of demand, and
prevents buyers in one market segment from reselling to buyers in another market segment. *

5. Oligopolies are characterized by a small number of firms where the top three firms hold the majority of the
market. If in an oligopoly market, firm A is almost twice as big as firm B and firm C then
[* C. firms A, B, and C will tend to use non-price strategies to maintain their profits or market share. *]
6. In a monopolistic competition industry, if one firm appreciably increased its price from the existing
equilibrium price, which of the following outcomes would most likely ensue?
[* A. It would likely suffer a significant decrease in its market share, because its competitors would be unlikely
to deviate from the established equilibrium price. *]
7. Which factor characterizes the competitive relationship between firms in an oligopoly market structure?
[* B. Interdependence: what one firm doesin setting prices, determining production levels, investing in R &
D, and so forthcan significantly affect other firms' competitive positions. *]
8. Unregulated (natural) monopolies maintain their status through a variety of measures. Whether any particular
measure can effectively constrain new firms from entering the market depends on
[* A. proprietary technology, exclusive ownership of resources, or government licenses. *]

9. Regulated monopolies are empowered by public authority for which specific reason?

[* B. The need to avoid the unnecessary use of duplicate resources that could be more efficiently employed by a
single supplier to meet the needs of the broadest range of consumers. *]
10. Using a significantly greater economy of scalewith attendant lower, long-run average total coststo
restrict the market entry of new competitors
[* B. may not be effective in industries in which dynamic technology-driven changes frequently alter the
demand for product design features, performance qualities, and or production methods *]
11. In technology-intensive oligopoliescharacterized by dynamically evolving product designrestricting the
entry of additional firms is
[* B. achieved by patenting, the effective use of licensing restrictions, as well as by maintaining sustained
advantages in design and production *]
12. Whether the market structure is monopolistic or oligopolistic, a firm may increase consumer demand for its
product as an overall portion of market share if

13. One difference between firms already established in a monopolistic competition industry and those
attempting to enter it is that
[* D. established firms may be able to use product differentiation to help distinguish themselves from new
competitors *]
14. An average firm in an industry characterized by a homogeneous product, relatively low barriers to entry,
and a low concentration ratio
[* C. can attempt to increase market share through consumer-oriented changes in the design and perceived
value of its product(s) * ]
15. A monopolistic firm may operate in a relatively mature market with little likelihood for significant change
in technology or process efficiencies. To maximize its profits, such a firm might
[* B. consider diversifying its product line by offering modestly-enhanced variants of the same good or service
and selling these at prices marginally higher than for its existing product *]
16. Production differentiation can effectively be achieved by
[* B. implementing a broader range of combinations of price and quality than those offered by competitors *]
17. While mass retail industries have one or several dominant producers, smaller firms have a limited set of
nonpricing options. The most feasible of these include
[* B. seeking to differentiate themselves from their larger competitors by appealing to specific niche markets *]
18. In monopolistic competition industries, effective product differentiation is illustrated by
[* B. concentrated appeal to consumers in market demographics most likely to want or use the firm's principal
products * ]

19. Differentiation strategies vary in degree of effectiveness from one type of market structure to another. For
firms other than perfect competition
[* C. selective product development and enhancements which appeal to particular consumer classes can create
marketable differences between one firm's products and another's * ]
20. If a firm's industry devolved from a monopolistic competition into an oligopolistic structure, the firm would
discover that
[ * D. as surviving firms gain market share, they may enjoy lower average costs. * ]
21. A firm can increase both profit and per-unit profit margin by lowering production costs. To make this a
long-term outcome, the firm should
[* C. seek to update existing production technologies for greater future efficiencies, consider alternative energy
sources for production, and better retain and develop its human and intellectual capital resources * ]
22. A firm's cost-reduction strategies may span multiple stages, from acquisition of production input factors to
product service and maintenance. When seeking to lower cost in the short term, firms should
[* C. streamline and consider alternative methods of production * ]
23. Firms can shift their marginal cost curves to the right, resulting in higher outputs at the same or lower
maximum-profit prices. This can be done by
[ * B. reducing average total cost through reorganizing, production and increasing efficiencies in distribution * ]