Understanding Money and Market Structures

What are the main characteristics of an oligopoly?

• A market structure with many small firms and no barriers to entry.

• A market dominated by a single firm with complete control over prices.

• A market structure with a few large firms, interdependent pricing, high barriers to entry, and potential for collusion.

• A competitive market with free entry and exit for all firms.

How does a monopoly set its prices?

• A monopoly sets its prices by maximizing profit where marginal cost equals marginal revenue.

• A monopoly sets prices randomly without any strategy.

• A monopoly sets prices by following competitor pricing.

• A monopoly sets prices based on government regulations.

List three features of perfect competition.

• High barriers to entry

• 1. Many buyers and sellers; 2. Homogeneous products; 3. Free entry and exit.

• Limited number of buyers and sellers

• Differentiated products

What are the dynamics of monopolistic competition?

• Monopolistic competition involves many firms, product differentiation, some market power, and non-price competition.

• Monopolistic competition is characterized by price wars among firms.

• All firms in monopolistic competition sell identical products.

• Monopolistic competition has only one firm with complete market power.

Explain the shape of the average cost curve.

• The average cost curve is V-shaped.

• The average cost curve is L-shaped.

• The average cost curve is U-shaped.

• The average cost curve is a straight line.

What does the marginal revenue curve look like in perfect competition?

• The marginal revenue curve is upward sloping.

• The marginal revenue curve is downward sloping.

• The marginal revenue curve is a vertical line.

• The marginal revenue curve is horizontal.

Define money in the context of banking.

• Money is a type of investment that generates interest.

• Money is only physical currency like coins and bills.

• Money is a government-issued document that represents ownership.

• Money is a medium of exchange, unit of account, and store of value used in banking.

What is the difference between abnormal profit and normal profit?

• Normal profit is always higher than abnormal profit.

• Abnormal profit is the same as normal profit.

• Abnormal profit is a loss incurred by the firm.

• Abnormal profit exceeds normal profit, which is the minimum profit needed to keep a firm in business.

How do firms in an oligopoly typically behave regarding pricing?

• Firms in an oligopoly typically avoid aggressive price competition and may engage in price leadership or collusion.

• Firms in an oligopoly always lower prices to attract more customers.

• Firms in an oligopoly frequently engage in price wars to gain market share.

• Firms in an oligopoly set prices independently without considering competitors.

What is a price maker in a monopoly?

• A price maker in a monopoly is a firm that follows market prices set by competitors.

• A price maker in a monopoly is a firm that cannot influence the price of its product.

• A price maker in a monopoly is a firm that sets the price of its product due to lack of competition.

• A price maker in a monopoly is a government entity that regulates prices.