competition, monopoly and oligopoly

Which of the following is a barrier to entry?

• Brand loyalty

• Lack of advertising

• Low set-up costs

• Free information flow

Which of the following is a feature of a competitive market?

• Easy entry and exit

• Firms with a high market share

• Small number of buyers

• Small number of sellers

Which of the following is a possible disadvantage of oligopoly?

• Lower prices

• Collusion

• More choice

• More innovation

Which of the following industries is likely to be oligopolistic?

• Chicken farming

• Petrol

• Restaurant

• Flower selling

Which exists in highly competitive market but not in monopoly?

• Barriers to entry

• Economies of scale

• Many sellers

• Higher price

Prices tend to be lower in a competitive industry than in a monopoly. Why is this?

• Profits are lower in a monopoly

• A monopoly is a price taker

• Competitive industry has more economies of scale

• New firms are free to enter the industry

What is a possible advantage to the consumer of in a monopoly market?

• Its average production costs will be lower than if there were many suppliers

• Its profits will be higher than if there were many suppliers

• It is able to restrict competition

• It can determine the market price

What is not likely to be true about the monopoly compared with a competitive firm?

• A monopoly will earn a higher rate of profit

• A monopoly will gain a greater share of the market

• A monopoly will offer a wider choice to the consumer

• A monopoly will operate on a larger scale of production

Machu Picchu is Peru's most popular tourist destination. One train company, PeruRail, operates a monopoly service up to the site. Why might competition on the route increase the fares paid by passengers?

• Competitive firms have more influence on price than a monopoly

• Competitive firms never make a loss

• Less advantage may be taken of economies of scale

• More profit may be available to spend on new technology to reduce costs of production

Why might a government encourage a monopoly?

• It can have high average costs

• It can compete against foreign firms

• It can prevent innovation

• It can make excessive profits