Chapter 4 Test Bank Answers Ethics In The Marketplace

Chapter 4

Velasquez Test Bank

MULTIPLE CHOICE

1. Which of the following models results in just outcomes, respects moral rights, and satisfies utilitarianism?
2. Pure monopoly
3. Equilibrium point
4. Oligopoly
5. Perfect market competition

Topic: Applying Ethics to Market Competition

Learning Objective 4.1: Apply ethics to market competition

Skill Level: Understand the Concepts

Difficulty Level: Moderate

1. When every seller finds a willing buyer, and every buyer finds a willing seller, what has been achieved?
2. Equilibrium
3. Utility
4. Positive demand
5. Marginal utility

Topic: Perfect Competition

Learning Objective 4.2: Outline the conditions that must be present to achieve ethical perfect competition

Skill Level: Apply what you know

Difficulty Level: Moderate

1. Which of the following indicates a principle that states the more of an item a person consumes, the less satisfying each additional item becomes?
2. Imperfect competition
3. Increasing marginal costs
4. Diminishing marginal utility
5. Equilibrium point

Topic: Perfect Competition

Learning Objective 4.2: Outline the conditions that must be present to achieve ethical perfect competition

Skill Level: Understand the concepts

Difficulty Level: Moderate

1. Which of the following is achieved when the supply and demand curves for an item meet and cross?
2. Marginal utility
3. Equilibrium
4. Imperfect competition
5. Surplus

Topic: Perfect Competition

Learning Objective 4.2: Outline the conditions that must be present to achieve ethical perfect competition

Skill Level: Understand the concepts

Difficulty Level: Moderate

1. In a perfectly competitive market, when do prices achieve capitalist justice for the seller?
2. At the equilibrium point
3. On the demand curve
4. On the supply curve
5. When utility is gained

Topic: Perfect Competition

Learning Objective 4.2: Outline the conditions that must be present to achieve ethical perfect competition

Skill Level: Apply what you know

Difficulty Level: Moderate

1. When do prices in a perfectly competitive market motivate a firm to invest in resources?
2. When demand is low
3. When resources can be used efficiently
4. When consumers move to bundles of goods
5. When demand is high

Topic: Perfect Competition

Learning Objective 4.2: Outline the conditions that must be present to achieve ethical perfect competition

Skill Level: Analyze it

Difficulty Level: Easy

1. In a perfectly competitive free market, what is the outcome when benefits and burdens are shared and individuals are paid based on the value of contribution made to the organization?
2. Capitalist justice
3. Marginal utility
4. Equilibrium
5. Price-fixing

Topic: Perfect Competition

Learning Objective 4.2: Outline the conditions that must be present to achieve ethical perfect competition

Skill Level: Analyze it

Difficulty Level: Moderate

1. Which of the following is an aspect of a monopoly market?
2. There are reduced barriers to entry in the market.
3. The supply and demand curves do not reach equilibrium.
4. Additional resources are added to the market to counter shortages.
5. One dominant seller has a substantial market share.

Topic: Monopoly Competition

Learning Objective 4.3: Evaluate monopoly competition in terms of ethical principles

Skill Level: Understand the concepts

Difficulty Level: Moderate

1. Monopolies can charge prices well above the supply curve, and even above equilibrium price. Why don’t other producers enter the market when prices are above equilibrium?
2. The price will fall to equilibrium, making profits unattainable.
3. The monopolizing company will cut prices to drive out new competition.
4. There are barriers to entry that make it virtually impossible to enter the market.
5. It will be more difficult to establish a strong customer base.

Topic: Monopoly Competition

Learning Objective 4.3: Evaluate monopoly competition in terms of ethical principles

Skill Level: Analyze it

Difficulty Level: Moderate

1. The ability of a monopoly to charge high prices and reap high profits is a violation of
2. supply and demand.
3. capitalist justice.
4. imperfect competition.
5. utility.

Topic: Monopoly Competition

Learning Objective 4.3: Evaluate monopoly competition in terms of ethical principles

Skill Level: Understand the concepts

Difficulty Level: Moderate

1. In a monopoly market, quantities can be set at less than the equilibrium amount, and prices are set
2. at equilibrium.
3. above equilibrium.
4. below equilibrium.
5. at rates determined by the government.

Topic: Monopoly Competition

Learning Objective 4.3: Evaluate monopoly competition in terms of ethical principles

Skill Level: Analyze it

Difficulty Level: Moderate

1. Which of the following is an outcome of a monopoly market?
2. Resources are used in ways that produce shortages, causing prices to be higher.
3. Demand increases because of the scarcity of ownership.
4. Prices are set below equilibrium and profit is made on volume, not cost levels.
5. A perfectly competitive free market is achieved.

Topic: Monopoly Competition

Learning Objective 4.3: Evaluate monopoly competition in terms of ethical principles

Skill Level: Analyze it

Difficulty Level: Difficult

1. Keeping resources out of monopoly markets where shortages show more products are needed, and diverting resources to markets without a shortage violates which ethical principle?
2. Capital justice
3. Negative rights
4. Supply and demand
5. Utilitarianism

Topic: Monopoly Competition

Learning Objective 4.3: Evaluate monopoly competition in terms of ethical principles

Skill Level: Analyze it

Difficulty Level: Difficult

1. In an imperfectly competitive market, having a few dominant sellers will create
2. a monopoly.
3. anticompetitive practices.
4. perfect competition.
5. an oligopoly.

Topic: Oligopolistic Competition

Learning Objective 4.4: Differentiate the ethical implications of oligopolistic and monopolistic competition

Skill Level: Analyze it

Difficulty Level: Moderate

1. Which of the following bests describes oligopoly markets?
2. They are highly concentrated markets.
3. There are very few barriers to entry.
4. There is one significant seller supported by less dominant sellers.
5. They have little ability to influence the market or prices.

Topic: Oligopolistic Competition

Learning Objective 4.4: Differentiate the ethical implications of oligopolistic and monopolistic competition

Skill Level: Understand the concept

Difficulty Level: Moderate

1. Which of the following is the outcome of two or more companies that were competitors joining together to create one company?
2. A monopoly
3. A horizontal merger
4. Less concentration in the market
5. Perfectly competitive markets

Topic: Oligopolistic Competition

Learning Objective 4.4: Differentiate the ethical implications of oligopolistic and monopolistic competition

Skill Level: Apply what you know

Difficulty Level: Moderate

1. When managers of oligopolies work together to limit the quantity of goods available in the market and create a shortage, they can unfairly destroy smaller competitors by
2. price-fixing.
3. bid rigging.
4. manipulating supply.
5. exclusive dealing arrangements.

Topic: Oligopolistic Competition

Learning Objective 4.4: Differentiate the ethical implications of oligopolistic and monopolistic competition

Skill Level: Analyze it

Difficulty Level: Moderate

1. Which of the following occurs when managers in an oligopoly market agree in advance which company will submit a winning proposal for a product or service being offered to a buyer?
2. Exclusive dealing arrangements
3. Predatory pricing
4. Retail maintenance agreements
5. Bid rigging

Topic: Oligopolistic Competition

Learning Objective 4.4: Differentiate the ethical implications of oligopolistic and monopolistic competition

Skill Level: Analyze it

Difficulty Level: Moderate

1. Which of the following occurs when prices are set at an artificial level with a goal of destroying a competitor?
2. Predatory price discrimination
3. Price discrimination
4. Bribery
5. Tying arrangements

Topic: Oligopolistic Competition

Learning Objective 4.4: Differentiate the ethical implications of oligopolistic and monopolistic competition

Skill Level: Apply what you know

Difficulty Level: Moderate

1. Which of the following is considered to be the single most important piece of antitrust legislation in the United States today?
2. The Interstate Commerce Act of 1887
3. The Sherman Antitrust Act of 1890
4. The Tobacco Trust Act of 1908
5. The Clayton Act of 1914

Topic: Oligopolies and Public Policy

Learning Objective 4.5: Interpret how public policy is developed in relation to the effects of oligopoly

Skill Level: Understand the concepts

Difficulty Level: Easy

1. Which of the following is a key interpretation of Section 2 of the Sherman Antitrust Act?
2. All monopolies are illegal and must be broken up.
3. A monopoly cannot use its power to maintain its monopoly.
4. A current monopoly can extend its monopoly into other markets.
5. A company cannot acquire a monopoly by buying another company.

Topic: Oligopolies and Public Policy

Learning Objective 4.5: Interpret how public policy is developed in relation to the effects of oligopoly

Skill Level: Understand the concepts

Difficulty Level: Difficult

1. Which of the following prohibits price discrimination, exclusive contracts, tying arrangements, and mergers between companies that may substantially lessen competition?
2. The Interstate Commerce Act of 1887
3. The Sherman Antitrust Act of 1890
4. The Tobacco Trust Act of 1908
5. The Clayton Act of 1914

Topic: Oligopolies and Public Policy

Learning Objective 4.5: Interpret how public policy is developed in relation to the effects of oligopoly

Skill Level: Understand the concepts

Difficulty Level: Moderate

1. Which of the following is one of the main ideas behind the do-nothing viewpoint of an oligopoly power?
2. Economies of scale are good for business.
3. Concentration leads to interdependence among companies with little price competition.
4. There is a positive correlation between concentration and profitability.
5. Regulation should be set up to control the activities of large corporations.

Topic: Oligopolies and Public Policy

Learning Objective 4.5: Interpret how public policy is developed in relation to the effects of oligopoly

Skill Level: Analyze it

Difficulty Level: Moderate

1. According to J. Fred Weston, which of the following is a basic assumption of the antitrust view of oligopoly power?
2. Concentration leads to less interdependence and price competition among companies.
3. Concentration helps to ensure product differentiation leading to less need for advertising.
4. There is a negative correlation between concentration and profitability.
5. Concentration is due mostly to mergers, and a high degree of concentration is unnecessary.

Topic: Oligopolies and Public Policy

Learning Objective 4.5: Interpret how public policy is developed in relation to the effects of oligopoly

Skill Level: Analyze it

Difficulty Level: Moderate

1. Which of the following views of oligopoly power holds that economies of scale will be lost if firms are broken up or limited in size?
2. The regulation view
3. The antitrust view
4. The do-nothing view
5. The trust-buster view

Topic: Oligopolies and Public Policy

Learning Objective 4.5: Interpret how public policy is developed in relation to the effects of oligopoly

Skill Level: Analyze it

Difficulty Level: Moderate

SHORT ANSWER

1. Identify the seven features of perfectly competitive free markets.

Sample

Topic: Perfect Competition

Learning Objective 4.2: Outline the conditions that must be present to achieve ethical perfect competition

1. How do price and quantity move to equilibrium in a perfectly competitive market?

Sample

Topic: Perfect Competition

Learning Objective 4.2: Outline the conditions that must be present to achieve ethical perfect competition

1. How does a monopoly market limit economic utility?

Sample

Topic: Monopoly Competition

Learning Objective 4.3: Evaluate monopoly competition in terms of ethical principles

1. Discuss how a monopoly places restrictions on the negative rights that a perfectly free market respects?

Sample

Topic: Monopoly Competition

Learning Objective 4.3: Evaluate monopoly competition in terms of ethical principles

1. Which of the seven features of a purely competitive market are not present in an oligopoly?

Sample

Topic: Oligopolistic Competition

Learning Objective 4.4: Differentiate the ethical implications of oligopolistic and monopolistic competition

1. Discuss the three components of the fraud triangle.

Sample

Topic: Oligopolistic Competition

Learning Objective 4.4: Differentiate the ethical implications of oligopolistic and monopolistic competition

1. Based on the assumptions of J. Fred Weston in his antitrust view of oligopoly power, what are the advantages of breaking up an oligopoly?

Sample

Topic: Oligopolies and Public Policy

Learning Objective 4.5: Interpret how public policy is developed in relation to the effects of oligopoly

1. Discuss the regulation view of oligopoly power.

Sample

Topic: Oligopolies and Public Policy

Learning Objective 4.5: Interpret how public policy is developed in relation to the effects of oligopoly