Chapter 7: Section 1 & 2

How many firms are in a monopoly?

1

What keeps competitors from entering a monopoly-controlled market?

1. Legal Restriction 2. Economies of Scale 3. Control of Essential

What are the 4 features that identify different market structures?

1. Number of Buyer & Seller 2. Product's uniformity across 3. Ease of Entering into the market 4. Form of Competition among firms

Which of the following may result from the success of a monopoly?

All of the previous(above)

Which of the following is a valid criticism of monopolistic competition?

Although firms try to claim that their products differ significantly from others, they usually do not.

Why do firms in monopolistic competition typically operate with excess capacity?

Buyers are spread out among the many close competitors; although firms are capable of producing greater output, they produce at the equilibrium level, where supply equals demand.

A perfectly competitive firm has a large effect on the market price.

False

A television is an example of a commodity.

False

Firms in monopolistic competition must take the reaction of other firms into account when deciding on price.

False

Firms in monopolistic competition never operate with excess capacity.

False

Monopolies never go bankrupt.

False

The government can never make it illegal to enter a particular market.

False

The market for breakfast cereals is an example of undifferentiated oligopoly.

False

There are high barriers to entry in the market in perfect competition.

False

Which of the following is true about a perfectly competitive market?

Firms produce standardized commodities.

What is the difference between an undifferentiated oligopoly and the differentiated oligopoly?

In an undifferentiated oligopoly, the product, such as steel, is identical among producers. In a differentiated oligopoly, firms sell products that are different such as Wheaties & Corn Flakes.

How do the prices for goods produced by monopolies typically compare to the prices for goods produced by perfectly competitive firm?

Monopolies' goods are usually more expensive.

How does the market structure of monopolistic competition contain elements of both "monopoly" and "competition"?

Monopoly: each firm has some control over price. Competition: barriers to entry are low; competitive firms can and do enter the market.

Which of the following is true?

There are high barriers to entry in a monopolized market.

Why do oligopolists spend large amounts to advertise their products?

They need differentiate their product among the few competitors.

A differentiated oligopoly sells that differ across producers.

True

A firm operating at minimum efficient scale is taking advantage of economies of scale.

True

A natural monopoly may emerge from the nature of costs.

True

A perfect competitor has no market power.

True

An oligopoly is a market dominated by just a few firms.

True

Cartels are illegal in the United States.

True

Firms in monopolistic competition can leave the market easily in the long run.

True

In perfect competition there are many buyers and sellers.

True

Monopolies can be beneficial.

True

OPEC is an example of a cartel.

True

The demand curve for monopolists' output also is the market demand curve.

True

The government itself may be a monopolist.

True

Which of the following markets is NOT likely to be an example of perfect competition?

a large corporation

If a company that makes skateboards wants its product to stand out from other brands of skateboards, which of the following might it do?

all of the previous(above)

What do economists believe causes an oligopolistic market structure?

all of the previous(above)

Which of the following is true about monopolistic competition?

barriers to entry into the market are low

Which of the following is an example of monopolistic competition?

books

Which of the following helps oligopolistic firms to decrease competition and increase profit?

collusion

What does the demand curve for an individual corn farmer look like?

horizontal line

Which of the following best describes the U.S. Postal Service?

monopoly

Why might a monopolist keep price below the profit-maximizing level?

none of the above(to avoid government regulation)

Which of the following has the most number of firms?

perfect competition

Which of the following usually results from colluding firms?

prices are higher

Which of these is an example of a geographic monopoly?

the sole grocery store in a town

Which of the following markets is an example of an oligopoly?

tobacco