Question

1. A concentration ratio is intended to measure

1. How much of an industry is concentrated in central Canada
2. How much of a given industry is concentrated in the hands of foreign-owned transnational corporations
3. The number of firms in an industry
4. How much production in a given market is controlled by a few firms
5. The proportion of an industry that concentrates on export market

2. Economic profits can exist in an oligopolistic industry in the long-run because of
   1. Natural barriers to entry
   2. Economies of scale
   3. Barriers created by exiting firms
   4. Barriers created by government policy
   5. All of the above

3. Which of the following forms of competitive behavior is observed in an imperfectly competitive market

1. Creating barriers to entry
2. Offering product guarantees
3. Advertising
4. Offering competing product standards
5. All of the above

4. In the sense used in this chapter, “choosing” prices means that prices are

1. Determined by market forces
2. Determined by international forces
3. Set by regulatory agencies such as marketing boards
4. Se by individual firms
5. Controlled by the government

5. The excess capacity theorem in monopolistic competition
   1. Implies that the trade-off for product variety is a higher unit production cost
   2. Arises because of the assumption of freedom of entry and downward sloping demand curves
   3. Means that firms will not producing at minimum average total cost in the long-run equilibrium
   4. Is a characteristic of long-run equilibrium in the market structure
   5. All of the above

Answer 1

1. Correct option is d. Concentration ratio is combined market shares of a given number of firms to the whole market size.

2. Option e , all of the above. Oligopoly is a market which is controlled by a few firms. There is intense competition and all firms compete hard. All factors listed above may make economic profits in the long run.

3. Option e. All of the above can be observed in the imperfect markets as firms are price makers and products are differentiated and to attract customers companies advertise a lot.

4. Option d.imperfect markets as firms are price makers.