Markets and Competition Bonus Test Coach Lott
Please print answer sheet and put your answers on the answer sheet.
1. Which of the following is NOT a key economic question?
a. / Who consumes these goods and services?b. / How should it be ensured that goods and services are paid for?
c. / What goods and services should be produced?
d. / How should these goods and services be produced?
2. Which of the following is characteristic of a traditional economy?
a. / Communities tend to be fast-growing.b. / Children tend to have the same jobs as their parents did.
c. / They have a high standard of living.
d. / They are usually based on light industrial production.
Characteristics of Market Structures
Market Structure / Number of Firms
in Industry / Influence over Price / Entry into
Market
P / Few / Some / Difficult
Q / One / Extensive / Almost Impossible
R / Many / None / Easy
S / Many / Limited / Easy
3. “Pure monopoly” should replace what letter in the table?
a. / Q / c. / Pb. / R / d. / S
4. What market structure does the letter “R” in the table represent?
a. / oligopoly / c. / perfect competitionb. / monopolistic competition / d. / pure monopoly
5. Unlike a general partnership, in a limited partnership
a. / the inactive partner has limited liability for the business's debts.b. / the partners must pay special business taxes.
c. / the business does not end with the death of a partner.
d. / all partners share equal financial responsibility for the firm's decisions.
6. What letter on the graph represents the proper location for the market structure “oligopoly”?
a. / Y / c. / Zb. / W / d. / X
7. What letter on the graph represents the proper location for the market structure “monopoly”?
a. / W / c. / Zb. / X / d. / Y
8.
PepsiCo, Inc.Employees / 151,000
Location of Operations / PepsiCo sells soft drinks in approximately 170 countries, snack food in more than 100 countries, and juices in approximately 23 countries.
Source of Profits / Pepsi-Cola ($992 million) 35%
Frito-Lay ($1.791 billion) 64%
Tropicana Products, Inc. ($40 million) 1%
Selected Products / Soft Drinks: Diet Pepsi, All Sport, Mountain Dew, Pepsi One, Pepsi-Cola, Slice, Lipton Teas, Aquafina
Snack Foods: Cheetos, Doritos, Fritos, Lay’s, Ruffles, Sabritas, Santitas, Tostitos, Rold Gold pretzels
Juices: Tropicana Pure Premium, Tropicana Twister, Dole Juices, Fruvita Juices
Market Shares / Soft Drinks: 33% of the U.S. market
Snack Foods: 60% of the U.S. snack chip industry
Juices: 70% of not-from-concentrate juice market in U.S.
Source: PepsiCo, Inc. Annual Report, 1998.
Based on the table, what type of product does PepsiCo sell in the most countries?
a. / snack foods / c. / not-from-concentrate juicesb. / soft drinks / d. / juices
9. A merger of corporations involved in different steps of manufacturing or marketing is known as a
a. / vertical merger. / c. / horizontal merger.b. / conglomerate. / d. / multinational merger.
10. How could the Chinese economy be characterized?
a. / free marketb. / mixed, but on the side of free market
c. / centrally planned
d. / mixed, but on the side of centrally planned
11. Which letter represents the proper location on the diagram for “unlimited liability”?
a. / T / c. / Yb. / W / d. / V
12. Which letter represents the proper location on the diagram for “owners earn dividends”?
a. / Y / c. / Wb. / Z / d. / X
Nonfarm Sole Proprietorships in the United States
(approximate figures)
Total Number of Sole Proprietorships / 16,154,000
Percent of Sole Proprietorships Engaged in Different Types of Activities / Forestry and fishing / 2%
Mining / 1%
Construction / 1%
Manufacturing / 3%
Transportation / 4%
Wholesale and retail / 18%
Finance, insurance, real estate / 9%
Services / 50%
Other / 12%
Total receipts (in millions) / $790,630
Net income (in millions) / $166,799
Source: Statistical Abstract of the United States.
13. Suppose you ranked the 9 activities of sole proprietorships shown in the table. The most common activity would be rank 1 and the least common, rank 9. What rank would you give to wholesale and retail activities?
a. / rank 2 / c. / rank 3b. / rank 1 / d. / rank 4
14. Based on the table, approximately what number of sole proprietorships are engaged in mining?
a. / 3,230,800 / c. / 161,540b. / 1,615,400 / d. / 323,080
15. An advantage of a corporation is that
a. / owners have limited liability for debt.b. / owners have direct and immediate control over daily management of the business.
c. / the business is subject to little government regulation.
d. / owners pay fewer taxes than owners of other forms of business.
16. An example of a market economy is
a. / the United States. / c. / the former Soviet Union.b. / the Inuit. / d. / North Korea.
17.
What type of merger created Mega Corporation in the illustration?
a. / vertical merger / c. / conglomerate mergerb. / horizontal merger / d. / diagonal merger
18.
According to the illustration, what is the least common form of business organization in the United States?
a. / joint ventures / c. / partnershipsb. / corporations / d. / proprietorships
19. Which of the following is NOT a form of nonprice competition?
a. / physical characteristics / c. / advertisingb. / location / d. / discounts
20. Your uncle owns a convenience store that has branches nationwide. His store is an example of a
a. / business franchise. / c. / multinational.b. / consumer cooperative. / d. / professional organization.
21. A decrease in competition within an industry can result in
a. / increased output.b. / more efficient resource allocation.
c. / a firm wielding economic and political power.
d. / lower prices.
22.
“So long as mankind lived by raising crops and herding animals, there was not much need for measuring small units of time. The seasons were all important—to know when to expect the rain, the snow, the sun, the cold. Why bother with hours and minutes? Daylight was the only important time, the only time when men could work.”From Daniel J. Boorstin’s The Discoverers: A History of Man’s Search to Know His World and Himself, 1985
What type of economic system does this passage describe?
a. / command economy / c. / traditional economyb. / mixed economy / d. / market economy
23.
Where would the U.S. economy be located in the diagram, in W, X, Y, or Z?
a. / X / c. / Zb. / W / d. / Y
24. All of the following are characteristics of a command economy EXCEPT
a. / it is not designed to meet the wants of consumers.b. / it can change direction drastically in a brief period of time.
c. / public services are available at little or no cost.
d. / it provides workers with few incentives to work hard.
25. What is one kind of monopoly that the U.S. government generally permits?
a. / professional sports leagues / c. / the telephone companyb. / certain kinds of medications / d. / low-price gasoline
26. What is monopolistic competition?
a. / one company selling several different products under different namesb. / one company selling the identical product under different names
c. / many companies selling similar but not identical products
d. / a very few companies selling identical products
27. When a major car company lowers its prices, other car makers will probably
a. / maintain existing prices. / c. / lower their prices.b. / go out of business. / d. / raise their prices.
28.
Based on the graph, the top 4 companies in the soft drink industry produced what percentage of all soft drink output?
a. / 90% / c. / 82%b. / 85% / d. / 87%
29. Which group of people ultimately determines the products that a free enterprise economy produces?
a. / property owners / c. / local governmentb. / Congress / d. / consumers
30. Perfect competition is characterized by all of the following EXCEPT
a. / a large number of buyers and sellers. / c. / identical products.b. / sellers acting together to set prices. / d. / well-informed buyers and sellers.
Essay
31.
/ Making Comparisons Compare a command economy to a market economy by listing a strength and a weakness of each. State how each type of economy satisfies the wants and needs of individuals.32. Making Comparisons How do competition, product variety, and price vary between monopolistic competitors and a monopoly?