G202 EXAM 2
1. Market power exists when firms are able to:
a. Lower prices below marginal cost to increase consumer surplus
b. Restrict competition to sustain prices above marginal cost
c. Reduce advertising expenditures while increasing product sales
d. Eliminate government regulations to improve efficiency
2. Market power can exist even when multiple rival firms operate in the same industry if:
a. The firms charge identical prices to consumers
b. Products are differentiated, and markets are segmented (e.g., NIKE vs. ADIDAS, PEPSI
vs. COKE)
c. The firms offer identical services and advertising strategies
d. Government regulators force price uniformity
3. A company that prevents competitors from entering the market by controlling essential
production resources is engaging in which strategy to restrict competition?
a. Control of an essential resource
b. Price fixing through legal agreements
c. Exclusive customer discounts
d. Using third-party distributors to block competitors
4. An example of non-market strategies used to restrict competition is:
a. Patent or copyright protection
, b. Collusion between rival firms
c. Exclusive contracts with major suppliers
d. Offering large rebates to high-volume customers
5. Collusion among firms to act as a monopoly by fixing prices and restricting competition is:
a. Legal if done through trade associations
b. Illegal and classified as cartel behavior
c. Only illegal if it involves international companies
d. Encouraged by governments to stabilize markets
6. A firm maximizes its profit when:
a. Total revenue equals total cost
b. Marginal revenue (MR) equals marginal cost (MC)
c. Fixed costs exceed variable costs
d. Consumer surplus is minimized
7. If marginal revenue is greater than marginal cost (MR > MC), then the firm should:
a. Reduce output to increase profitability
b. Increase production to maximize profit
c. Stop production and shift resources to another market
d. Keep production constant to maintain equilibrium
8. Perfect price discrimination occurs when:
a. Consumers in different regions pay different prices
b. Each consumer is charged exactly what they are willing to pay
c. Firms set the same price for all consumers regardless of demand
d. Governments regulate price differences among consumer groups
1. Market power exists when firms are able to:
a. Lower prices below marginal cost to increase consumer surplus
b. Restrict competition to sustain prices above marginal cost
c. Reduce advertising expenditures while increasing product sales
d. Eliminate government regulations to improve efficiency
2. Market power can exist even when multiple rival firms operate in the same industry if:
a. The firms charge identical prices to consumers
b. Products are differentiated, and markets are segmented (e.g., NIKE vs. ADIDAS, PEPSI
vs. COKE)
c. The firms offer identical services and advertising strategies
d. Government regulators force price uniformity
3. A company that prevents competitors from entering the market by controlling essential
production resources is engaging in which strategy to restrict competition?
a. Control of an essential resource
b. Price fixing through legal agreements
c. Exclusive customer discounts
d. Using third-party distributors to block competitors
4. An example of non-market strategies used to restrict competition is:
a. Patent or copyright protection
, b. Collusion between rival firms
c. Exclusive contracts with major suppliers
d. Offering large rebates to high-volume customers
5. Collusion among firms to act as a monopoly by fixing prices and restricting competition is:
a. Legal if done through trade associations
b. Illegal and classified as cartel behavior
c. Only illegal if it involves international companies
d. Encouraged by governments to stabilize markets
6. A firm maximizes its profit when:
a. Total revenue equals total cost
b. Marginal revenue (MR) equals marginal cost (MC)
c. Fixed costs exceed variable costs
d. Consumer surplus is minimized
7. If marginal revenue is greater than marginal cost (MR > MC), then the firm should:
a. Reduce output to increase profitability
b. Increase production to maximize profit
c. Stop production and shift resources to another market
d. Keep production constant to maintain equilibrium
8. Perfect price discrimination occurs when:
a. Consumers in different regions pay different prices
b. Each consumer is charged exactly what they are willing to pay
c. Firms set the same price for all consumers regardless of demand
d. Governments regulate price differences among consumer groups
