Econ: Chapter 7 Review

Which of the following questions would be most helpful in determining the market structure of a specific market?

• How far are goods shipped?
• How similar are the products?
• How many people want to buy?
• How are the corporations organized?

As it becomes easier to start a new business in a market, that market

• attracts more consumers.
• increases transaction costs.
• becomes more competitive.
• offers higher-quality products.

In a market with perfect competition, how are prices determined?

• by supply and demand
• by government regulation
• by cultural ideals of fairness
• by agreement among producers

In which market structure do producers have the most market power?

• monopolistic competition
• monopoly
• oligopoly
• perfect competition

Why is competition among restaurants in a big city an example of monopolistic competition?

• Starting a restaurant is expensive.
• Restaurants often go out of business.
• All restaurants serve food, and each restaurant is distinctive.
• All restaurants serve people, and one restaurant serves the most people.

Many teenagers in a particular neighborhood work as babysitters a few hours a week. They have different personalities and degrees of experience. What is the market structure for babysitting in that neighborhood?

• monopolistic competition
• monopoly
• oligopoly
• perfect competition

Which of these statements describes how economies of scale affect the market for electrical power in a community?

• Because it would cost much more for two companies to offer power within a community, there is usually only one.
• Because putting up long-distance power lines is expensive, power plants are commonly built close to each community.
• Because large communities are cheaper to supply with power than small towns, small communities typically lack service.
• Because big power plants produce more power than small ones, a community near the plants risks serious air pollution.

Which of these is the best example of an externality?

• You decide to stop snacking between meals.
• You enjoy looking at your neighbor’s garden.
• Your shoe store stops selling your favorite style.
• Your new bicycle goes faster than you expected.

Why do goods made in factories that cause pollution tend to be overproduced?

• Some stores stock more than they can sell.
• Some costs are not charged to the producer.
• Some benefits are wanted by the community.
• Some people may refuse to purchase the items.

Why doesn’t the market system work to provide street lighting and other public goods?

• Too few of these services are available.
• Important needs cannot be left to chance.
• Voters put pressure on local governments.
• There is no easy way to charge individual users.