Market Structures

Question 1

Main objective of firms in perfect competition

Answer 1

profit maximisation

Question 2

define perfect competition

Answer 2

many buyers and sellers with no market power

Question 3

what type of product is in a perfectly competitive market

Answer 3

homogenous

Question 4

In a perfectly competitive market firms are

Answer 4

price takers

Question 5

in a perfectly Competitive market there are ______ barriers to entry exit

Answer 5

no

Question 6

perfectly competitive Markets produce what type of efficiency in the long run equilibrium

Answer 6

allocative

Question 7

In the short run perfectly competitive markets produce what kind of profit

Answer 7

SNP

Question 8

What kind of efficiency do perfectly competitive markets not create

Answer 8

dynamic efficiency

Question 9

what kind of demand curve is on the perfect competition diagram

Answer 9

perfectly elastic

Question 10

define oligopoly

Answer 10

Few sellers all taking into account each other’s behaviour

Question 11

How many firms are in an oligopoly

Answer 11

few large

Question 12

In an oligopoly firms are price

Answer 12

makers

Question 13

In an oligopoly there are _____ barriers to entry

Answer 13

high

Question 14

What kind of decision-making occurs in oligopolies

Answer 14

interdependent

Question 15

Why are oligopolies better than monopolies

Answer 15

more consumer choice

lower price

Question 16

What kind of efficiency occurs in oligopolies

Answer 16

dynamic

Question 17

collusive oligopolies are _____ inefficient

Answer 17

economically

Question 18

Define natural monopoly

Answer 18

Monopoly that arises because there are such substantial fixed costs/economies of scale that only one firm is viable

Question 19

being a natural monopoly is the most ______ ________ metic to overcome the massive fixed costs

Answer 19

productively efficient

Question 20

in a natural monopoly which 2 efficiencies can be achieved

Answer 20

productive and allocative

Question 21

what is a drawback of natural monopoly

Answer 21

lack of consumer choice

lack of competition threat can lead to high prices

Question 22

define monopolistic competition

Answer 22

A market that shares some characteristics of monopoly and some of perfect competition

Question 23

what are the 3 characteristics of monopolistic competition

Answer 23

Large number of firms
No/very low barriers to entry
Product differentiation

Question 24

3 advantages of monopolistic competition

Answer 24

completion lowers prices for consumers
lower x-inefficiency
greater equality

Question 25

what are the disadvantages of monopolistic competition

Answer 25

no economic efficiency
advertising spending is wasteful
no dynamic efficiency

Question 26

what is a limitation of using monopolistic competition

Answer 26

assumptions are unrealistic

depends on the nature of the market, type of product