Market Structures and their short and long run

Question 1

Economists usually prefer to have _____ market.

Answer 1

competitive

Question 2

a place where two parties can gather to facilitate the exchange of goods and services.

Answer 2

Market

Question 3

Market could be ____ or ____

Answer 3

Physical or Virtual

Question 4

may entail the exchange of commodity, service, information, or currency or any combination of these.

Answer 4

Market Transaction

Question 5

Only two parties are required to perform _____. Nevertheless, a third party is required to promote _____ and restore _____ _____.

Answer 5

transaction
competition
market balance.

Question 6

depicts how firms are differentiated and categorized based on types of goods they sell (homogeneous, heterogeneous) and how their operations are affected by external factors and elements.

Answer 6

Market structure

Question 7

Profit Maximization for short run and long run analyses

Answer 7

MR = MC

Question 8

the ideal market system in which all producers and consumers have complete and symmetric knowledge, there are no transaction costs, and a large number of producers and customers compete against one another.

Answer 8

Perfect Competition

Question 9

Characteristics of Perfect Competition

Answer 9

Large number of buyers and sellers
Homogeneous Product
Firms is a Price Taker
Free Entry and Exit 
Perfect Knowledge
Perfect Mobility
No Selling Costs
Perfectly elastic demand curve

Question 10

Economic profit of Perfect Competitive Markets in the short run

Answer 10

could be positive, zero, or negative

Question 11

Economic profit of Perfect Competitive Markets in the long run

Answer 11

zero

Question 12

Perfectly Competitive market the long run equilibrium

Answer 12

Intersection of demand curve, price, marginal revenue, and minimum of ATC

Question 13

a market situation in which there is only one seller of a product with barriers to entry of others. The product has no close substitutes. The cross elasticity of demand with every other product is very low. This means that no other firms produce a similar product.

Answer 13

Monopoly

Question 14

Characteristics of Monopoly

Answer 14

Single Seller
No Close Substitute
High levels of barriers to entry due. Three main sources: Monopoly resources, government regulation, and production process.
Price Maker
Price Discrimination
Demand Curve is less elastic due since no competition is present

Question 15

More output is sold, so Q is higher, which tends to increase total revenue

Answer 15

Output Effect

Question 16

The price falls, so P is lower, which tends to decrease total revenue

Answer 16

Price Effect

Question 17

When Price effect on revenue is greater than the output effect the marginal revenue is

Answer 17

Negative

Question 18

When Output effect on revenue is greater than the Price effect the marginal revenue is

Answer 18

Positive

Question 19

occurs because the monopolist produces less than the socially efficient quantity of output,

Answer 19

Inefficiency of Monopoly

Question 20

the area between the monopoly price, efficient quantity, and monopoly quantity, wherein the consumers value the products more than the cost of producing of the product.

Answer 20

Deadweight Loss

Question 21

a market situation in which there are a few firms selling homogeneous or differentiated products. It is difficult to pinpoint the number of firms in “competition among the few”. With only a few firms in the market, the action of one firm is likely to affect the others.

Answer 21

Oligopoly

Question 22

Characteristics of Oligopoly

Answer 22

Few Sellers
High Barriers to Entry and exit
Differentiated Products
Price Maker
Interdependent
Selling Costs 
Group Behavior
Kinked Demand Curve (Less elastic)

Question 23

is called cartel wherein firms cooperate with each other and make common policies for all the firms. The group of firms behaves like a monopoly thus gaining supernormal profits.

Answer 23

Collusive Oligopoly

Question 24

Oligopolistic firms do not cooperate and engage in competition with each other. Firms drive price levels and profit levels down to the level of normal profit only.

Answer 24

Non-collusive Oligopoly

Question 25

a situation where economic actors interacting with one another each choose their best strategy given the strategies that all the other actors have chosen.

Answer 25

Nash Equilibrium

Question 26

drives firms to occupy more market power than the other firms to have greater economic profit.

Answer 26

Self-interest

Question 27

is the best strategy for a player in a game regardless of the strategies chosen by other players.

Answer 27

Dominant Strategy

Question 28

Economic profit of Monopoly in the long run

Answer 28

Positive, zero, or negative

Question 29

Economic profit of Monopoly in the short run

Answer 29

Positive, zero, or negative

Question 30

Economic profit of Oligopoly in the short run

Answer 30

Positive, zero, or negative

Question 31

Economic profit of Oligopoly in the long run

Answer 31

Positive, zero, or negative if colluding cartels hold together

Question 32

Refers to a market situation where there are many firms selling a differentiated product. “There is competition which is keen, though not perfect, among many firms making very similar products”. No firm can have any perceptible influence on the price-output policies of the other sellers nor can it be influenced much by their actions.

Answer 32

Monopolistic Competition

Question 33

Characteristics of Monopolistic Competition

Answer 33

Large number of buyers and sellers
Low Barriers to Entry and Exit
Some degree of price control
Small Product-Differentiation
Highly elastic demand yet not perfect

Question 34

Economic profit of Monopolistic Competition in the long run

Answer 34

Zero Economic Profit

Question 35

Economic profit of Monopolistic Competition in the short run

Answer 35

Positive, zero, or negative

Question 36

where MC and ATC are equal and it is defined as ATC being minimum and constant.

Answer 36

Efficient Scale

Question 37

the difference between the efficient scale and the quantity produced which is based in the point of tangency of the demand curve (AR) to the ATC curve.

Answer 37

Excess Capacity

Question 38

the intersection of the demand curve (AR curve) and the MC curve

Answer 38

Efficient quantity