Chapter 14: Market Structure and Market Power

A market with a large number of sellers and a high level of product differentiation is known as

A monopolistically competitive market

Walmart has a large aisle that displays many different kinds of toothpastes. This observation indicates that the toothpaste market is

A monopolistically competitive market

What is collision?

Agreements between sellers to increase their market power

Price ceilings tend to create shortages when used to

Bring down price in a competitive market

(Figure: Market Power) Based on the demand curves for four sellers, which of the following sellers has the most market power?

Firm C

According to the Rational Rule for Sellers, a seller should choose the output level where _____ and the price level _____.

Marginal cost equals marginal revenue; that is on the seller's demand curve at that output level

_____ using specific business practices that increase a seller's market power and excludes other sellers is illegal under U.S. law.

Monopolizing

In which market structure do the actions of a rival have a significant impact on your operations?

Oligopoly

What type of relationship exists between the level of a company's market power and the price that its owner is able to charge for its product?

Positive

Which of the following markets is an example of a perfectly competitive market?

Shares of McDonald's Stocks

How would the discount effect on marginal revenue differ for a seller increasing sales from 100 units to 101 units compared to an increase in sales from 1,000 units to 1,001 units?

The discount effect would be smaller for a change from 100 to 101 units than 1000 to 1001 units

Patents on drugs to treat AIDS were removed in South Africa. How would the market for these drugs have been different if there had never been patents on drugs?

The drugs would not have been developed

One of the market failures caused by market power is

Underproduction

To avoid harm to society, the government often becomes the supplier of a good or service when the respective market

Would be a natural monopoly, and the good or service is considered essential

The higher the level of market power among the sellers in a market, the _____ when the Rational Rule for Sellers is applied.

lower the market output

When a company has market power, it is _____ in its market.

not a price-taker

When buyers in a market have market power, then the

product price is lower

(Figure: Output Level) According to the rational rule, what output and price should the firm in the following example choose?

quantity= 4; price= $7

Which of the following is a characteristic of monopoly that is not present in other market structures?

there is only one seller

According to the Rational Rule for Sellers, the manager of this company should choose to produce _____ of output and charge a price of _____.

two units; $450