ECO 204 Week 4 Quiz

 This file of ECO 204 Week 3 Quiz shows the solutions to the following problems:


 1. Products may be homogeneous or differentiated in the ________ market structure.

 perfectly competitive

 monopolistic

 monopolistically competitive

 oligopolistic

 2. The right answer to the debate regarding the welfare effects of advertising is that

 advertising always leads to concentration in an industry.

 advertising always leads to positive economic profits in an industry.

 advertising always improves the functioning of the market.

 There is no right answer.

 3. Assume that an economy producing two products, skateboards and in-line skates, is initially in equilibrium, and that skateboards and in-line skates are substitutes. If consumer preferences shift away from skateboards and toward in-line skates, which of the following will NOT occur?

 In the short run, firms producing skateboards will incur losses.

 In the short run, firms producing in-line skates will earn a profit.

 Additional capital will begin to flow into in-line skates production in the long run.

 Additional capital will begin to flow into skateboard production in the long run.

 4. Monopolies, oligopolies, and monopolistic competitive industries all

 earn positive profits in the long run.

 have market power.

 are completely unconstrained in their pricing.

 raise price and quantity over what would occur in perfect competition in order to maximize their profits.

 5. A ________ system is one in which all possible trades that make some societal members better off without making others worse off have been exhausted.

 Pareto maximized

 Pareto optimal

 market

 general equilibrium

 6. A monopolistically competitive firm that is incurring a loss will shut down if

 marginal revenue is less than marginal cost.

 revenues are less than variable costs.

 price is less than average total cost.

 price is less than marginal cost.

 7. Firms stop producing tapes and start producing compact discs because people prefer compact discs to tapes. This will

 make the distribution of outcome more equitable.

 make the economy more stable.

 improve efficiency.

 make the economy less stable.

 8. The four largest firms account for approximately 90% of U.S. beer sales. The U.S. beer industry would be best classified as a(n)

 perfectly competitive industry.

 monopolistically competitive industry.

 oligopoly.

 monopoly.

 9. Firms with market power must decide all of the following EXCEPT

 how much to supply in each input market.

 how much to produce.

 how to produce it.

 what price to charge for their output.

 10. Suppose a policy change will generate $100,000 of benefits for low-income families and $120,000 of costs for high-income families. This change can best be described as

 Pareto efficient.

 inefficient.

 potentially efficient.

 equitable.

Economics - General Economics
 Circular Flow Diagram . Explain how the circular flow diagram relates to the current economic situation. Using the circular flow diagram, explain a way that your family interacts in the factor market and a way that it interacts in the products market.

 Supply and Demand . Analyze how the law of demand applies to a recent purchase that you made. Describe how the product has changed in price and explain whether the price change is due to supply or demand. Did the change in price affect

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