Topic 4 Competiton and Market Structures quizzes

Economists USUALLY want to A. Discourage Monopolies because they are the OPPOSITE of Competition B. encourage Monopolies because they represent the survival of the fittest

A. Discourage Monopolies because they are the OPPOSITE of Competition

What happens if a monopolist increases the price of a good? A. The monopolist will sell less. B. The monopolist will sell more. C. Sales will not change. D. Government intervention will be required.

A. The monopolist will sell less.

How does a monopolistically competitive market compete? It competes on the basis of A. characteristics of the products they sell B. location C. price D. service level E. advertising

A. characteristics of the products they sell B. location D. service level E. advertising

Which type of business would have the lowest technological barrier to entry? A. dog walking B. medical laboratory C. payroll processing firm D. smartphone app development

A. dog walking

The purpose of both deregulation and regulation like antitrust laws is to A. promote competition B. promote government control C. promote inefficient commerce D. prevent monopolies

A. promote competition

OLIGOPOLY describes a market dominated by A FEW FIRMS. Economists call an industry an oligopoly if the 4 largest firms produce at least 70% of the output. According to pages 145-146 in your textbook, which of these represents an Oligopoly? Choose ALL that apply Airline Industry Video Game Console Industry Music Companies Household Appliance Industry Automobile Industry

Airline Industry Video Game Console Industry Music Companies Household Appliance Industry Automobile Industry

Why is a price war harmful to producers? A. If prices go too high, then the producers will have too many competitors. B. If prices go too low, then the producers won't be able to make a profit. C. If there is a price war, then there can no longer be a price leader. D. If prices go too high, then the producers will have too few competitors.

B. If prices go too low, then the producers won't be able to make a profit.

What do all types of monopolies have in common? A. economies of scale B. a single seller that dominates an entire market C. government action to ensure that prices don't get too high D. a unique product to sell

B. a single seller that dominates an entire market

The government would likely block a merger if the merger would A. bring two large companies together. B. lead to unfair market control. C. decrease prices too much. D. generate greater efficiencies.

B. lead to unfair market control.

A hotel that offers a complimentary fruit basket and a concierge who will help you plan your activities is an example of what kind of non-price competition? A. advertising, image, or status B. service level C. location D. physical characteristics

B. service level

Why do Oligopolies have to use Game Theory? Because they do not want to fall victim to the Prisoners' Dilemma Because there are only a few large firms so their decisions are interdependent on the decisions of their competitors

Because there are only a few large firms so their decisions are interdependent on the decisions of their competitors

In Perfectly Competitive Markets (section 4.1 in textbook) the products are IDENTICAL. Because they are IDENTICAL, one producer cannot charge more than another producer because they cannot justify a higher price due to Product Differentiation. Since they cannot charge a higher price, the producer with the lowest costs makes the most money. All of these markets would be considered Perfectly Competitive EXCEPT: Blue Jeans Strawberries Organic Whole Wheat Flour White Granulated Sugar

Blue Jeans

OLIGOPLIES also have SIMILAR but not identical products. However, Oligoplies are closer to Monopolies than Monopolistically Competitive Markets with LOTS of sellers. Oligopolistic Markets are dominated by a FEW SELLERS, where the 4 largest firms control 70% or more of the market. All of these markets are Oligoplies EXCEPT: Blue Jeans Computers Media Companies Cell Phones Game Consoles

Blue Jeans

How does having a patent give a company a monopoly? A. A patent is a contract issued by a local authority that gives a single firm the right to sell its goods within an exclusive market. B. A patent gives firms the right to operate a business, especially where scarce resources are involved. C. A patent gives a company exclusive rights to sell a new good or service for a period of time. D. A patent allows the companies in an industry to restrict the number of firms in a market.

C. A patent gives a company exclusive rights to sell a new good or service for a period of time.

Why are individual suppliers unable to set their own prices in a purely competitive market? A. Their products are too unique to generate demand. B. The market is flooded with excessive supply. C. They do not have enough influence over the market. D. Government price fixing takes away their freedom of action.

C. They do not have enough influence over the market.

Price discrimination is A. a factor that causes a producer's average cost per unit to fall as output rises. B. the right to sell a good or service within an exclusive market. C. division of customers into groups based on how much they will pay for a good. D. the ability of a company to change prices and output like a monopolist.

C. division of customers into groups based on how much they will pay for a good.

Which of the following is NOT a condition for perfect competition? A. many buyers and sellers participate B. identical products are offered C. market barriers are in place D. buyers and sellers are well-informed about goods and services

C. market barriers are in place

How does a perfectly competitive market compete? It competes on the basis of A. characteristics of the products they sell B. location C. price D. service level E. advertising

C. price

HORIZONTAL Mergers and Acquisitions (M&A) occur among companies that produce the same product or service. They often lead to MONOPOLIES and are therefore opposed by the Government. Examples of HORIZONTAL INTEGRATION include (choose ALL 3 that apply) Coke and Pepsi AT&T and Verizon Ford Motor Company and TESLA Ford Motor Company and US Steel IKEA and the Baltic Forests

Coke and Pepsi AT&T and Verizon Ford Motor Company and TESLA

What is it called when companies agree to charge the same prices as each other? P.s. It is Illegal in the US Collusion Price Discrimination

Collusion

CAPITALISM relies on these 2 things to make markets better. Choose 2: Free will Competition Incentives Government

Competition Incentives

MONOPOLISTICALLY COMPETITIVE Markets has products that are SIMILAR but not identical. Companies compete based on differentiating their product from their competitors on the basis of: a. physical characteristics of the product b. location (convenience stores) c. service level (dine-in or drive-thru, SuperCuts or Salon) d. advertising/image/status All of these are Monopolistically Competitive Markets EXCEPT: Wine Hotels Restaurants Corn Blue Jeans

Corn

Which of the following effects of an industry's deregulation would show that it had failed to achieve its objective? A. Several large companies have gone bankrupt. B. Several large companies have merged. C. The industry has expanded wildly. D. Market prices have risen significantly.

D. Market prices have risen significantly.

An oligopoly is A. an agreement among firms to charge one price for the same good. B. a formal organization of producers that agree to coordinate price and output. C. a way to attract customers without lowering price. D. a market structure in which a few large firms dominate a market.

D. a market structure in which a few large firms dominate a market.

Why can't a monopolistically competitive firm raise prices as high as a true monopoly can? A. because, like a monopoly, their output is extremely limited B. because new firms will enter the market with identical products C. because monopolistically competitive firms already earn profits well above their costs D. because competition would ensure that customers buy a rival firm's cheaper product

D. because competition would ensure that customers buy a rival firm's cheaper product

Price discrimination can only work if A. a group of firms determines the highest maximum price. B. customers can resell the good for a lower price. C. prices are discounted by the age of the customer. D. firms have some control over the price.

D. firms have some control over the price.

A monopolistically competitive firm has some control over price because A. its output is large enough to affect the demand. B. it can work with a rival firm to set prices in the market. C. there are many competing firms. D. it can differentiate its goods from other products.

D. it can differentiate its goods from other products.

Why is a purely competitive market undesirable for owners of supplier firms in that market? A. high revenues B. high wages C. low costs D. low profits

D. low profits

Another situation when Monopolies can be good is when they form "Natural Monopolies": a Monopoly that is better because it delivers goods and services to the public at the LOWEST COST. Examples of Natural Monopolies include ALL of the following: Electric Services, like PG&E (Who wants 3 sets of powerlines running through their neighborhood?) Passenger trains like Amtrak and subway trains like BART Water and Gas Utilities Car manufacturers

Electric Services, like PG&E (Who wants 3 sets of powerlines running through their neighborhood?) Passenger trains like Amtrak and subway trains like BART Water and Gas Utilities

BARRIERS TO ENTRY can lead to monopolies. All of these Barriers can lead to Monopolies or Oligopolies forming. They have been mentioned in this video or on pages 134, 135 and 145 of your textbook under section "Barriers to Entry". Read these sections in your textbook and then choose ALL barriers mentioned: High Start-up Costs Technology Economies of Scale Government Regulations, Patents, Franchises and Licenses A lot of family wealth

High Start-up Costs Technology Economies of Scale Government Regulations, Patents, Franchises and Licenses

VERTICAL INTEGRATION happens when a company Merges with or Acquires (M&A) another company that is part of its Supply Chain. Maybe it wants to acquire the raw materials to control costs or the transportation of its finished product. These mergers are less concerning to the Government because they usually do not result in Monopoly power. Examples of VERTICAL INTEGRATION include both (2) of the following: Coke and Pepsi Ford Motor Company and Tesla IKEA and the Baltic Forests Ford Motor Company and US Steel AT&T and Verizon

IKEA and the Baltic Forests Ford Motor Company and US Steel

Monopolies exist when one company controls the market. All of these are monopolies EXCEPT: BART (Bay Area Rapid Transit) PG&E (Pacific Gas & Electric) AMTRAK Benicia Water & Sewer Levi's

Levi's

Does a company have to be "THE ONLY ONE" in a market to have Monopoly Power? Yes No

No

Wireless Cell Phone Service in the US is an example of what type of Market Structure? Monopolistic Competition Oligopoly Perfect Competition Monopoly

Oligopoly

Firms in Monopolistically Competitive and Oligopoly Markets COMPETE on the basis of all of these things EXCEPT Advertsing Physical Characteristics like style and quality Service Level Location Price

Price

Price Discrimination is not illegal. In order for firms to engage in Price Discrimination, they must be able to: a. have market power b. be able to segregate their customers based on "willingness to pay" c. be able to make the resale of the product or service difficult, if not impossible. Have market Read the last section of 4.2 in your text (pages 139-140) called "Price Discrimination" and choose ALL examples of Price Discrimination mentioned: Memorial Day Sales Senior Citizen or Student Discounts at the movies or theatre Discounted airline fares Manufacturers' Rebate Offers

Senior Citizen or Student Discounts at the movies or theatre Discounted airline fares Manufacturers' Rebate Offers

Microsoft tried to gain Monopoly Power until they were checked by an anti-trust lawsuit. Here's how Microsoft tried to gain Monopoly Power in the Internet Browser Market: They tried to force computer manufacturers like Dell and HP to install ONLY their Internet Explorer browser when building PCs by telling them they HAD to IF they wanted to install Microsofts Windows Operating System They tried to merge with or acquire their main competition, Netscape

They tried to force computer manufacturers like Dell and HP to install ONLY their Internet Explorer browser when building PCs by telling them they HAD to IF they wanted to install Microsofts Windows Operating System

Nash Equilibrium was invented by mathemarician, John Nash, whose life story is told in the book and movie "A Beautiful Mind". It describes the way to win the Prisoners' Dilema and get out of jail free a solution of a non-cooperative game involving two or more players in which each player is assumed to know the equilibrium strategies of the other players

a solution of a non-cooperative game involving two or more players in which each player is assumed to know the equilibrium strategies of the other players

OPEC Organization of Petroleum Exporting Countries) is a cartel, i.e. a formal collusion between these oil producing nations: Algeria, Angola, Equatorial Guinea, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, the Republic of the Congo, Saudi Arabia (the De facto leader), the United Arab Emirates and Venezuela. The US is not a member. Read https://www.investopedia.com/articles/economics/08/determining-oil-prices.asp to see what determines oil prices and how OPEC influences oil prices. OPEC has a lot of control over oil prices by creating the most demand for oil: the OPEC countries consume the most oil in the world controlling the oil supply: reduce the supply and prices will go up. producing the most oil in the world: Saudi Arabia is the largest producer of oil in the world

controlling the oil supply: reduce the supply and prices will go up.

De-regulation can potentially be good if it leads to unstable financial markets encourages more COMPETITION

encourages more COMPETITION

Since there are so few firms in Oligopolistic Markets, firms compete using lowest price strategies game theory

game theory

COMPETITION is important because it leads to lower prices leads to greater variety of goods and services from which to choose encourages innovation, which is necessary for economic growth and higher standards of living Creates winners and losers, so it is exciting to watch results in higher quality goods and services being produced

leads to lower prices leads to greater variety of goods and services from which to choose encourages innovation, which is necessary for economic growth and higher standards of living results in higher quality goods and services being produced

Game Theory is used by firms in Oligopolistic Markets to make strategic decisions that will enable them to maximize profits innovate and develop new products

make strategic decisions that will enable them to maximize profits

Oligoplies tha have a "Dominant Strategy" are blessed because they have a strategy that provides them with the most profit depending on what their competitor chooses to do no matter what their competitor chooses to do

no matter what their competitor chooses to do

ANTI-TRUST Laws were designed to prevent monopolies encourage monopolies

prevent monopolies

Monopolies can be good IF They are NEVER good! they encourage innovation by the granting of Government Patents, which encourage innovation by guaranteeing that the inventor will be able to exclusively profit from his/her invention for 20 years, rather than have someone else steal his.her "Intellectual property" as soon as he/she has developed it

they encourage innovation by the granting of Government Patents, which encourage innovation by guaranteeing that the inventor will be able to exclusively profit from his/her invention for 20 years, rather than have someone else steal his.her "Intellectual property" as soon as he/she has developed it