Market Structure Quiz

Which is NOT a characteristic of a monopoly?

• Seller sets the market price
• Entry into the market is easy
• Firm sells a unique product
• One seller

Perfect competition involves:

• Sellers working together to set prices
• A large number of buyers & sellers
• Difficulty entering & exiting the market
• Little information is available to buyers

The town of Utopia has three gas stations. The owners of these gas stations make decisions together about when to raise and lower gas prices. It would be difficult for another gas station to enter this market. Which market structure best describes the market for gas in Utopia?

• Perfect competition
• Monopolistic competition
• Oligopoly
• Monopoly

A new firm recently arrived in Utopia offering much higher internet speeds than existing providers. The other providers have gone out of business because so many Utopian residents have switched to the new provider. What will most likely happen to the price of internet service in Utopia?

• The price will decrease because the new provider wants to keep its customers happy.
• The price will increase because there is only one internet provider in Utopia.
• The price will decrease because there is only internet provider in Utopia.
• There will be no change in price.

List the four market structures in order from least competitive to most competitive.

• Oligopoly, Monopoly, Perfect Competition, Monopolistic Competition
• Perfect Competition, Oligopoly, Monopoly, Monopolistic Competition
• Monopoly, Oligopoly, Monopolistic Competition, Perfect Competition
• Monopoly, Monopolistic Competition, Perfect Competition, Oligopoly

If a major car company such as Ford lowers their prices, what are other car companies likely to do?

• Raise their prices
• Go out of business
• Maintain their current prices
• Lower their prices

Which of the following statements is true?

• Monopolistic competitors have an incentive to differentiate their products so customers have choices, but monopolies do not have this incentive.
• Monopolistic competitors & monopolies have the same amount of influence over the price of their products.
• Both oligopolies & industries with monopolistic competition involve a large number of sellers.
• All industries fit neatly into one type of market structure.

Why does the government regulate natural monopolies?

• To increase competition in the market
• To prevent the monopoly from charging excessively high prices
• To ensure the monopoly provides an adequate, high-quality amount of the product
• All of the above are possible reasons for regulation

What are the advantages of economies of scale?

• Costs less per unit to produce an item
• Reduces barriers to entry in the market and increases competition
• Better quality products are produced

There are many sellers of blue jeans.  Each blue jean seller makes their product slightly different to set it apart from others. There is free entry and exit into the blue jean market. Which market structure does this describe?

• Perfect Competition
• Oligopoly
• Monopoly
• Monopolistic Competition