Market Structures and Competition

Several farmers meet with their friends and talk about the future demand for corn, latest prices for crops and costs of farming. Which characteristic of a purely competitve market BEST fits this scene?

• Many buyers and sellers in the market

• Sellers offer identical products

• Buyers and sellers are well informed about products

• Sellers are able to enter and exit the market easily

What type of market structure is shown here?

• pure competition

• monopoly

• monopolistic competition

• oligopoly

What characteristic of a purely competitive market does crude oil have?

• The product has no subsititutes that are close to it in price
• the product has an unlimited number of sellers
• the product is always packaged in the same way
• The product is the same no matter who produces it

What is likely to be the MAIN barrier of entry into the business shown here?

• lack of government regulation

• limited consumer demand

• high cost of advertising

• complex technology

Which of the following industries is most likely to exist in a purely competitive market

• shoes
• wheat
• bottled water
• personal computers

In the market represented in the graph above, if one of the firms doubles it output, what whould happen to the price?

• the price would rise to meet the new demand

• the price would fall to eliminate surplus

• the price would rise at first them fall

• the price would remain the same

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

• an automobile manufacturer
• a supermaket chain
• a subway system
• a construction company

The main advantage of firms with economies of scale is that

• no matter how high their output rises, their average cost continues to fall

• because of their greater level of efficiency, they have lower start up costs

• Their average costs will begin to rise oly after they reach maximum output

• they can alter the price for their product as the cost of production changes

This company has a monopoly of the service it provides because

• it is a technological monopoly; no other company has the technology necessary to provide this service

• it is a patent monopoly; the government has given the company exclusive rights to provide this service

• it is an industrial monopoly; it bought out all of its competitors that provided this service

• It is a natural monopoly; it would not be efficient for more than one company to provide this service

Drug companies have a monopoly on many brand name prescription druges. What does the graph indicate about drug companies economic decisions during the period shown?

• they chose to limit output and charge more for their product

• they chose to increase output and charge less for their products

• they chose to limit output and charge less for their products

• they chose to increase output and charge more for their products