Tutorial Market system 1

Which is not a basic principle of a market system

• competition

• voluntary exchange

• socialism

• self-interest

Which of the following does not follow with the basic principles of market systems?

• People are driven by their desire to make a profit

• competition is discouraged

• people feel best when they freely trade for what they want

• innovation is encouraged

The following conditions are needed for perfect competition except?

• Same product
• Lack of barriers to enter market
• Many sellers
• Variable pricing mechanisms

The law of demand states

• when prices rise, the amount people will buy will rise
• when prices rise, the amount people will buy will decrease
• when prices rise, the amount people will sell will rise
• when prices rise, the amount people will sell will decrease

The law of supply states

• When prices rise, producers will want to produce more
• When prices rise, producers will want to produce less
• When producers producer more, they expect to make less money
• When producers producer less they expect to make more money

In perfect competition, the product is differentiated

• True
• False

In which market structure is there the MOST competition?

• Monopoly
• Oligopoly
• Monopolistic Competition
• Perfect Competition

In the 1990s, AT&T controlled 80% of the phone industry and was the ONLY provider of long distance phone service. This is an example of

• A monopoly
• Monopolistic Competition
• Perfect Competition
• Oligopoly

What is not part of perfect competition?

• buyer/ seller are well informed
• sellers cannot enter/ exit market easily
• low prices
• few barriers of entry

Perfect competition is characterized by

• a large number of sellers and buyers.
• diverse products.
• sellers acting together to set prices.
• uninformed buyers and sellers.