The automobile industry is
a. in monopolistic competition because brand names are important
b. in monopolistic competition because it has economies of scale
c. in monopolistic competition for legal reasons
d. an oligopoly because each firm must produce a large amount of output before it can achieve low average costs
e. an oligopoly for legal reasons
QUESTION 2Campaign finance reform is usually proposed
a. as a way of reducing the power of special-interest groups
b. as a form of rent seeking
c. by economists as a way of implementing the median voter model
d. by political action committees
e. by the Justice Department
QUESTION 3Economies of scale yield
a. declining average cost as output increases
b. declining marginal cost as output increases
c. declining total cost as output increases
d. diminishing average returns as output increases
e. increasing marginal revenue as output increases
QUESTION 4One goal of political action committees is to
a. encourage people to become more active in politics
b. engage in rent seeking
c. help raise funds for government agencies
d. evade taxes
e. make it easier for legislators to accept the median voter model
QUESTION 5In oligopoly, minimum efficient scale is large relative to the market.
a. True
b. False
QUESTION 6Some of the nation's best minds are occupied with devising schemes to avoid taxes and to transfer income to favored groups at the expense of market efficiency. These activities are called
a. rational ignorance
b. choice of the cyclical majority
c. rent seeking
d. competing interest legislation
e. a zero-sum game
QUESTION 7There are multiple models of pricing behavior in oligopolistic markets because
a. it is difficult to predict how rival firms will react to any pricing decision
b. the demand curve slopes upward for these firms
c. firms could earn profit in the long run unlike other markets
d. price has a direct impact on profit for a firm in oligopoly
e. the products are not identical in terms of quality, image, location
QUESTION 8Rent seeking activities by special interest groups result in
a. greater economic activity by promoting efficiency in government
b. lower economic activity by diverting resources to less-productive or nonproductive uses
c. a more equal distribution of income and wealth in the nation
d. lower expenditures by government through an increase in taxes
e. greater efficiency in the private economy and increased wealth for society
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