Market Structures Quiz

Which market structure is characterized by many buyers and sellers, homogeneous products, and perfect information?

• Monopoly

• Oligopoly

• Monopolistic Competition

• Perfect Competition

Answer explanation

Perfect Competition is characterized by many buyers and sellers, homogeneous products, and perfect information.

In which market structure do firms have some degree of market power due to product differentiation?

• Perfect Competition

• Monopoly

• Oligopoly

• Monopolistic Competition

Answer explanation

Firms in monopolistic competition have some market power due to product differentiation, allowing them to set prices to a certain extent.

What is a key characteristic of an oligopoly?

• A single seller dominates the market.

• Firms are price takers.

• Few large firms dominate the market.

• There is free entry and exit.

Answer explanation

An oligopoly is characterized by few large firms dominating the market, not a single seller or firms being price takers.

Which market structure is described by having a single seller with significant market power and high barriers to entry?

• Perfect Competition

• Monopolistic Competition

• Oligopoly

• Monopoly

Answer explanation

A Monopoly is described by having a single seller with significant market power and high barriers to entry, making it the correct choice in this scenario.

Which market structure is characterized by a single firm having complete control over supply and the ability to set prices without regard to competitors?

• Perfect Competition (PC)

• Monopolistic Competition

• Oligopoly

• Monopoly

Answer explanation

A Monopoly is characterized by a single firm having complete control over supply and the ability to set prices without regard to competitors.

In which market structure is product differentiation the highest?

• Perfect Competition (PC)

• Monopolistic Competition

• Oligopoly

• Monopoly

Answer explanation

Product differentiation is highest in monopolistic competition as firms in this market structure have the ability to differentiate their products through branding, quality, and other factors to attract customers.

The ease of entry and exit is greatest in which of the following market structures?

• Perfect Competition (PC)

• Monopolistic Competition

• Oligopoly

• Monopoly

Answer explanation

Perfect Competition (PC) has the greatest ease of entry and exit due to low barriers, many firms, and identical products, making it easy for new firms to enter and existing firms to exit.

How does the degree of market power change as we move from Monopoly to Perfect Competition?

• Increases

• Decreases

• Remains constant

• Fluctuates unpredictably

Answer explanation

The degree of market power decreases as we move from Monopoly to Perfect Competition due to increased competition and lower pricing power for firms.

Which of the following is an example of a market outcome in a monopoly?

• Lower prices and higher output compared to competitive markets

• Allocative and productive efficiencies

• Higher prices and lower output compared to competitive markets

• Easy entry and exit for firms

Answer explanation

In a monopoly, higher prices and lower output compared to competitive markets are common due to the lack of competition allowing the monopolist to set prices higher and produce less.