Topic 4 Market Structures

Several corn farmers in Iowa meet with their friends each week for breakfast. They talk about their families and about the weather. But soon they engage in more serious discussions about the future demand for corn, the latest prices being offered for their crop, and the cost of their seeds, fertilizer, and machinery.

What characteristic of purely competitive market BEST fits the scene described above

• Many sellers participate 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 described below:

1. many firms

2. no variety of goods

3. no barriers of entry

4. no control over prices

• pure competition

• monopoly

• monopolistic competition

• oligopoly

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

• The product has no substitutes 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 to entry in an automotive production factory?

• lack of government regulation

• limited consumer demand

• high cost of advertising

• complex technology

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

• shoes

• wheat

• bottled water

• personal computers

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

• an automobile manufacturer

• a supermarket 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 cost will begin to rise only after they reach maximum output

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

Amtrak has a monopoly on the service it provided 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 previously provided this service

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

Why does it make sense for theaters, museums, restaurants, and other facilities to offer discounts to senior citizens?

• Senior citizens usually bring other people with them who will pay full price

• Many senior citizens would not visit the facility if they had to pay full price

• These facilities usually have membership quotas for visitors of different ages and classes

• Senior citizens are more likely than younger people to spend additional money during their visit

Why the company that makes jeans considered both monopolistic and competitive?

• It has a monopoly on this color, but it must compete with those who make jeans in other colors

• It has a monopoly on its own design, but it must compete with other makers of jeans

• Its low prices gives it a monopoly but it must compete with makers of lower-priced jeans

• Its high price gives it a monopoly, but it must compete with makers of lower-priced jeans