Understanding Market Structures

What are the key characteristics of perfect competition?

• Key characteristics of perfect competition include many buyers and sellers, identical products, free market entry and exit, perfect information, and price-taking behavior.

• Differentiated products

• Few buyers and sellers

• Restricted market entry and exit

How do firms in a monopoly set prices?

• Firms in a monopoly charge the same price as their competitors.

• Firms in a monopoly set prices based on government regulations.

• Firms in a monopoly set prices based on the demand curve and profit maximization, typically charging a price higher than marginal cost.

• Firms in a monopoly set prices randomly without considering demand.

What is a defining feature of an oligopoly?

• A small number of firms dominate the market.

• A few firms collude to set prices.

• Many firms compete with no market power.

• A single firm controls the entire market.

In monopolistic competition, how do firms differentiate their products?

• Firms use government regulations to standardize products.

• Firms differentiate their products by lowering prices only.

• Firms rely solely on location to attract customers.

• Firms differentiate their products through branding, unique features, quality variations, customer service, and advertising.

What are the main barriers to entry in a monopoly?

• High startup costs, control over essential resources, government regulations, patents, and economies of scale.

• Low competition from other firms

• Abundant access to resources

• Minimal government oversight

How does the number of sellers affect market competition?

• The number of sellers has no impact on market competition.

• Fewer sellers increase market competition.

• More sellers increase market competition.

• More sellers decrease market competition.

What role does consumer choice play in monopolistic competition?

• Consumer choice eliminates competition among firms.

• Consumer choice has no impact on market prices.

• Consumer choice drives product differentiation and competition among firms.

• Consumer choice leads to a lack of product variety.

What is the significance of price elasticity in perfect competition?

• Price elasticity is irrelevant in perfect competition.

• Price elasticity helps firms in perfect competition understand the impact of price changes on sales and revenue.

• Firms can set prices independently of market demand.

• Price elasticity only affects monopolistic markets.

How do oligopolistic firms react to price changes by competitors?

• Oligopolistic firms always lower their prices regardless of competitors' actions.

• Oligopolistic firms increase prices to maximize profits without considering competitors.

• Oligopolistic firms typically follow price changes by competitors to maintain market stability and avoid losing market share.

• Oligopolistic firms ignore price changes and set their own prices independently.

What are the long-term economic profits in a monopoly?

• Monopolies cannot influence market demand.

• Monopolies can sustain long-term economic profits due to barriers to entry and price-setting power.

• Monopolies face no competition and must reduce profits.

• Monopolies are required to lower prices over time.