Market Structures

Question 1

What are the four main types of market structures?

Answer 1

Perfect competition, monopolistic competition, oligopoly, and monopoly.

Question 2

True or False: In a perfect competition market, firms are price makers.

Answer 2

False.

Question 3

Fill in the blank: A _______ is a market structure with many firms selling similar but not identical products.

Answer 3

monopolistic competition.

Question 4

What characterizes a monopoly?

Answer 4

A single seller controls the entire market for a product or service.

Question 5

Which market structure is characterized by a few large firms dominating the market?

Answer 5

Oligopoly.

Question 6

What is the primary goal of firms in any market structure?

Answer 6

Maximizing profit.

Question 7

True or False: In perfect competition, all firms sell identical products.

Answer 7

True.

Question 8

What is a key feature of oligopoly?

Answer 8

Interdependence among firms, where the actions of one firm influence others.

Question 9

Name one example of a product that might be sold in a monopolistic competition market.

Answer 9

Restaurants or clothing brands.

Question 10

What is a price taker?

Answer 10

A firm that must accept the market price for its product; typical in perfect competition.

Question 11

In which market structure do firms engage in non-price competition?

Answer 11

Monopolistic competition.

Question 12

Multiple Choice: Which of the following is NOT a characteristic of oligopoly? A) Few sellers B) High barriers to entry C) Homogeneous products D) Interdependence

Answer 12

C) Homogeneous products.

Question 13

What is meant by ‘barriers to entry’?

Answer 13

Obstacles that make it difficult for new firms to enter a market.

Question 14

True or False: In a monopoly, consumers have many substitutes for the product offered.

Answer 14

False.

Question 15

Fill in the blank: In a market with _______ competition, firms sell identical products but compete on price.

Answer 15

perfect.

Question 16

What is a key difference between perfect competition and monopolistic competition?

Answer 16

In perfect competition, products are identical; in monopolistic competition, products are differentiated.

Question 17

What is a cartel?

Answer 17

A group of firms that collude to control prices and limit competition.

Question 18

Multiple Choice: Which market structure typically has the lowest prices for consumers? A) Monopoly B) Oligopoly C) Perfect competition D) Monopolistic competition

Answer 18

C) Perfect competition.

Question 19

What does ‘market power’ refer to?

Answer 19

The ability of a firm to influence the price of its product.

Question 20

True or False: A firm operating in an oligopoly has no control over pricing.

Answer 20

False.

Question 21

What is the role of advertising in monopolistic competition?

Answer 21

To differentiate products and create brand loyalty.

Question 22

Fill in the blank: A monopoly is often considered a _______ market structure.

Answer 22

price maker.

Question 23

What is the significance of the kinked demand curve in oligopoly?

Answer 23

It illustrates price rigidity; firms are reluctant to change prices due to competitor reactions.

Question 24

What is the main objective of a firm in a monopoly?

Answer 24

To maximize profit by setting prices above marginal cost.

Question 25

Multiple Choice: Which type of market structure is least likely to have market failure? A) Monopoly B) Oligopoly C) Perfect competition D) Monopolistic competition

Answer 25

C) Perfect competition.