2.3 Competition

What is competition and how do different market structures affect it?

• Competition is the rivalry among sellers to attract customers while lowering costs.

• Competition is the collaboration among businesses to set prices.

• Competition is the process of businesses merging to form a monopoly.

• Competition is the government regulation of market prices.

What is a characteristic of pure competition?

• Few buyers and sellers

• Unique products

• Many buyers and sellers

• High barriers to entry

In a pure competition market structure, what type of products are produced?

• Unique products

• Identical products

• Luxury products

• Custom products

What is a barrier to entry in a pure competition market?

• High demand

• Start-up costs and technology

• Low supply

• Government regulations

What is a monopoly?

• A market with multiple sellers

• A market dominated by a single seller

• A market with no sellers

• A market with two sellers

How do monopolies form?

• When there are no barriers to entry

• When barriers prevent firms from entering a market with a single supplier

• When there are multiple suppliers

• When firms freely enter and exit the market

What can monopolies do with their power?

• Lower prices significantly

• Charge high prices

• Offer unlimited products

• Increase competition

What is a natural monopoly?

• A market with multiple firms competing

• A market where one firm controls the output

• A market with no competition

• A market with low start-up costs

Why do monopolists produce less for a higher price?

• To increase competition

• To maximize profits

• To reduce costs

• To improve quality

How are government monopolies created?

• Through competition

• Through patents

• Through mergers

• Through advertising