Chapter 7 Market Structures

Why do economists study pure competition when such a market structure does not exist in reality?

• to find ways to improve the mobility of resources

• to promote laissez-faire approaches to the economy

• to evaluate actual market structures against the ideal

• to help buyers and sellers know all the conditions that exist in a market

What is the distinguishing feature of a market structure with monopolistic competition?

• product reliability

• lower product prices

• product differentiation

• government-approved products

To attract buyers, monopolistic competitors tend to rely on ______.

• low prices

• advertising and promotions

• price controls

• superior products

What flaw in the market system would prevent health insurers from selling insurance to people with above-average health problems?

• spillover effects

• resource immobility

• insufficient information

• insufficient competition

Unemployment in a community where a large auto assembly plant has closed is an example of a flaw in the market system caused by ________.

• externalities

• resource immobility

• limited public goods

• insufficient information

What flaw in the market system prevented resources from being allocated to floodwalls in New Orleans, leaving the city vulnerable to a direct hit from a hurricane?

• spillover effects

• insufficient information

• insufficient competition

• insufficient public goods

In 1890, the government passed the Sherman Antitrust Law to _________.

• prevent future monopolies

• break up a major monopoly

• regulate existing monopolies

• create zones for existing monopolies

In 1914, the government passed the Clayton Antitrust Act to outlaw the sale of the same product to different consumers at different prices, a practice known as _________.

• cease and desist

• economies of scale

• price discrimination

• restraint intervention

What is the purpose of the Consumer Financial Protection Bureau?

• to oversee the safety of food and pharmaceuticals

• to prevent sellers from making false claims about their products

• to provide oversight and guidance in the financial lending industry

• to require corporations to share financial information with their stockholders

Given a variety of government interventions designed to protect markets and consumers, the U.S. economy is best described today as a modified _________ economy.

• free enterprise

• capitalist

• traditional

• command