Economics Chapter 5 Quiz

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A company combining with a supplier to gain control over resources is an example of what type of merger?

Horizontal merger

Conglomerate merger

Vertical merger (correct)

Mergers-combinations

What is a common method of product differentiation?

Price fixing

Collusive pricing

Location or packaging (correct)

Brand recognition

What market structure is typically indicated by a concentration ratio above 50%?

Oligopoly (correct)

Perfect competition

Monopolistic competition

Monopoly

What influences the market concentration besides economies of scale?

Technical innovation (A) Signup and view all the answers

What is a limitation of the concentration ratio in Canada?

It often excludes imports (C) Signup and view all the answers

A firm's ability to influence the price of its product is mainly determined by:

The difficulty for buyers to find substitutes (D) Signup and view all the answers

If Total Revenue is $100 and Total Product is 20, what is the Average Revenue?

$5 (C) Signup and view all the answers

A company is producing at a point where marginal revenue (MR) is $2 and marginal cost (MC) is $4, according to the profit maximising rule the firm should:

Produce less output (D) Signup and view all the answers

At a breakeven point:

Price equals average total cost. (C) Signup and view all the answers

In a perfectly competitive market in the long run, prices are set at:

Minimum average total costs (C) Signup and view all the answers

How does a monopoly typically exert influence in a market?

By having significant control over the market price, acting as a price-maker. (D) Signup and view all the answers

Which characteristic best defines an oligopoly?

A market where only a few firms with significant market power are competing. (B) Signup and view all the answers

What is the 'fair rate of return' in the context of firm profitability?

The profit rate a firm is pursuing, that covers both explicit and implicit costs. (C) Signup and view all the answers

Which of the following examples illustrates a situation where an oligopoly might engage in collusive behavior?

An organization of oil-producing countries, like OPEC. (C) Signup and view all the answers

How does imperfect competition differ from perfect competition with respect to price?

In imperfect competition, firms have some control over price. (B) Signup and view all the answers

In the short run, how does a monopoly maximize its profit?

By finding the output level where marginal cost is equal to price and charging the highest price possible. (D) Signup and view all the answers

Which of the following is a characteristic of an oligopoly?

A kinked demand curve in the short and long run. (D) Signup and view all the answers

What does 'conspiracy' refer to under the Competition Act of 1986?

Agreements to fix prices, restrict market entry, or divide markets. (B) Signup and view all the answers

What is the primary purpose of antitrust laws, like the Competition Act of 1986?

To prevent unfair business practices that reduce competition. (D) Signup and view all the answers

What does 'predatory pricing' typically involve, from the view of antitrust law?

Deliberately lowering prices below average cost to drive out competitors. (A) Signup and view all the answers