Economics Unit 3

Which of the following is an example of a natural monopoly?

A large town has only one electric company, but it charges very little and receives government subsidies to cover its costs of business.

What is monopolistic competition?

many companies of different sizes selling differentiated products

What is the definition of an oligopoly?

2 to 10 firms producing most of the output

What happens to a monopolistically competitive firm that begins to charge an excessive price for its product?

Consumers will substitute a rival's product.

Three of these scenarios describe a perfectly competitive market. Which of the following is NOT a characteristic of a perfectly competitive market?

Each seller's product is unique

Which of the following is an example of a geographic monopoly?

The town of Podunk is so small that it only has one gas station

What kind of market runs most efficiently when one large firm supplies all of the output, such as a utility company?

a natural monopoly

Which of the following markets is an example of monopolistic competition, where there are many producers selling differentiated items?

backpacks

which of the following is NOT a feature of monopolistic competition?

identical products

The car manufacturing industry is an oligopoly. Therefore, when the industry leader lowers its price per car, the other car makers will probably

lower their prices

Sunshine Island has three large supermarkets, Walmart, Target, and Costco. These stores supply all of the groceries for the island's population. How would you describe the market for groceries on Sunshine Island?

oligopoly

In the airline industry, there are two major companies who control most of the market, NorthWorst and U.S. Scareways. NorthWorst has heard rumors that U.S. Scareways will start to offer direct flights from Bentonville to Chicago for $500 next Monday, so NorthWorst decides to start offering the same flight at $450 dollars on Sunday. The airline industry is a __________ type of market, and NorthWorst is using ______ to be competitive

oligopoly/game theory

John lives in Canada, and is a producer of maple syrup. All of John's neighbors are also syrup producers, as they all live in a grove of maple trees. John and his neighbors sell their syrup at the local farmers market every Saturday, they all charge the same price, and all of them sell out of their supply at the end of the day. John is producing in a(n):

perfectly competitive market

which is NOT a characteristic of a monopoly?

there are many producers