Market Structures

They would be slightly higher because the affected firms do have the power to raise prices, but given the number of firms and ease of entry, prices would not increase as much as they would in the case of a true monopoly.

How do prices in monopolistically competitive firms compare to those in perfect competition?

B

How does a natural monopoly function? (A) A few firms are in perfect competition. (B) A single firm supplies all the output. (C) Imperfect competition makes it difficult for firms to do business. (D) The government supplies all buyers with the product.

D

How does a natural monopoly function? (A) The government supplies all buyers with the product. (B) A few firms are in perfect competition. (C) Imperfect competition makes it difficult for firms to do business. (D) A single firm supplies all the output.

D

How much control over price do companies in a perfectly competitive market have? (A) Total control (B) Very little (C) Some (D) None

B

In a perfectly competitive market, individual consumers have _____. (A) Less influence than producers concerning prices. (B) No influence over determining price. (C) More influence than producers concerning prices. (D) More influence than consumers in other market structures.

Patent.

License that gives the inventor of a new product the exclusive right to sell it for a certain period of time:

Differentiation.

Making a product different from other similar products:

Monopoly.

Market dominated by a single seller:

Oligopoly.

Market structure in which a few large firms dominate a market:

Perfect competition.

Market structure in which a large number of firms all produce the same product:

Monopolistic competition.

Market structure in which many companies sell products that are similar but not identical:

Natural monopoly.

Market that runs most efficiently when one large firm supplies all of the output.

Conditions

(A) Many buyers and sellers participate in the market. (B) Sellers are able to enter and exit the market freely. (C) Sellers offer a wide variety of products. (D) Buyers and sellers are well informed about products.

C

A major characteristic of monopolistic competition is that prices will be _____. (A) Unrelated to the type of competition. (B) Higher than in a true monopoly. (C) Higher than in perfect competition. (D) Lower than in perfect competition.

Imperfect competition.

A market structure that does not meet the conditions of perfect competition:

Nonprice competition.

A way to attract customers through style, service, or location, but not a lower price:

Price fixing.

Agreement among firms to charge one price for the same good:

Collusion.

Agreement among firms to divide the market, set prices, or limit production:

Barrier to entry.

Any factor that makes it difficult for a new firm to enter a market:

C

Firms in which market structure hold the most market power? (A) Monopolistic competition (B) Oligopoly (C) Monopoly (D) Perfect competition

Cartel.

Formal organization of producers that agree to coordinate prices and production:

D

What is an agreement among members of an oligopoly to set prices and production levels called? (A) Price leadership. (B) Competition. (C) Imperfect monopoly. (D) Collusion.

D

What is any factor that makes it difficult for a new firm to enter a market referred to as? (A) A sustainable cost. (B) A commodity. (C) Perfect competition. (D) A barrier to entry.

C

What is monopolistic competition? (A) One company selling several different products under different names. (B) One company selling the identical product under different names. (C) Many companies selling similar but not identical products. (D) A very few companies selling identical products.

monopolistic competition

Which market structure is known to use nonprice competition to highlight a product's characteristics to differentiate for the buyer?

D

Which of the following is an example of a barrier to entry? (A) Government deregulation (B) Low start-up costs (C) Perfect competition (D) High start-up costs

C

Which of the following is an example of a market that meets all four conditions for perfect competition? (A) Books (B) Jeans (C) Wheat (D) Bagels

D

Which of the following is characteristic of a competitive market? (A) Low output (B) High costs (C) Inexhaustible supply (D) Efficiency

A

Which of the following is not an example of barriers to entry? (A) In some counties, laws require retail stores to be closed on Sundays. (B) Cable companies must lay miles of underground cable before they can serve a single customer in a new market. (C) An entrepreneur who wants to own a clothing store must rent a building, hire workers, and buy clothing to sell. (D) A person who wishes to practice medicine is required to attend medical school, do an internship, and pass a state exam.

D

Which of the following markets is an example of monopolistic competition? (A) Oranges (B) Electricity (C) Cereal (D) Toothpaste

D

Which of the following statements is true about profits in a monopolistically competitive market? (A) Monopolistically competitive firms are as profitable as monopoly firms. (B) Profits are rare in monopolistically competitive markets. (C) Most firms will earn substantial profits from year to year. (D) Many firms will earn profits in the short term, but they must constantly innovate and compete to earn profits in the long term.

Cartel members rarely stick to the agreed-upon price and output, and prices fall as a result.

Why do cartels usually not last long?

C

Why does a perfectly competitive market require many participants as both buyers and sellers? (A) So that both buyer and seller have the same information. (B) In order to maintain quality over the goods. (C) So that no individual can control the price. (D) Because the merchandise must be uniform.

C

Why does the government sometimes give monopoly power to a company by issuing a patent? (A) The government does not want competition for the product. (B) The company pays the government for the patent. (C) The company can then profit from their research without competition. (D) The company makes a product better than anyone else's.

C

Patents are a form of monopoly that society allows because they _____. (A) Set up a situation in which only a few manufacturers can control an industry. (B) Give companies the right to decide who will be allowed to use their products. (C) Encourage firms to research and develop new products that benefit society as a whole. (D) Maintain an orderly way for companies to make a lot of money.