Day 12 DOL Economics: Market Structures

What is the primary goal of a business?

• to produce a product

• increase prices

• maximize profit

• lower quality of products

Why does government attempt to maintain competition in the market?

• by allowing monopolies to exist

• to insure low prices and higher quality products

• to insure high prices and lower quality products

• to regulate businesses more

Which of the following is a characteristic of a pure/perfect competition market?

• large number of buyers and sellers

• difficult to enter the market

• differentiated products

• use of non-price competition (advertising)

Products in a perfectly competitive market are-

• differentiated

• similar

• heterogeneous

• identical (homogeneous)

In a market with monopolistic competition-

• products are identical like agricultural goods

• there is product differentiation

• businesses have no control over price

• there is no advertising (non-price competition)

An oligopoly has-

• many small businesses competing for customers

• one large business competing for customers

• a few large sellers that dominate an industry

• a lot of advertising (non-price competition)

A problem with the oligopolistic market is-

• the ease of entering the industry.

• companies have no control over price.

• companies can use collusion to set prices higher.

• price wars.

In a monopoly-

• one seller dominates the market with a unique product.

• it is easy to enter the market.

• companies cannot control price.

• there are very few government regulations.

A natural monopoly-

• is controlled by the government such as a water company.

• occurs when a company has a patent to exclusively produce a product.

• exists in an isolated area or region where there is only one provider of a product.

• exists as a result of the high startup cost needed for infrastructure or materials.

A geographic monopoly-

• is controlled by the government such as a water company.

• occurs when a company has a patent to exclusively produce a product.

• exists in an isolated area or region where there is only one provider of a product.

• exists as a result of the high startup cost needed for infrastructure or materials.