Market Structures & Competition

Which of the following is a key characteristic of a monopoly? A) Many sellers offering similar products B) A single seller dominating the entire market C) Two firms competing for market share D) Many firms selling differentiated products

• B) A single seller dominating the entire market

• G) A single firm with limited market influence

• F) Multiple sellers with identical products

• E) A few sellers controlling the market

In a monopoly, the firm is considered a 'price maker' because: A) It must accept the market price B) It has no control over demand C) It can set prices without direct competition D) It competes with many other firms

• B) It faces significant competition from substitutes

• D) It has to follow government price controls

• C) It can set prices without direct competition

• A) It can only influence prices slightly

Which of the following best describes a barrier to entry in a monopoly? A) Low startup costs B) Patent protection giving exclusive rights to produce a product C) Many substitute products available D) Perfect information for all buyers and sellers

• A) High competition among existing firms

• C) Strict government regulations on pricing

• B) Patent protection giving exclusive rights to produce a product

• D) Abundant resources for all new entrants

A natural monopoly occurs when: A) The government grants exclusive rights to one firm B) A single firm can supply the entire market at a lower cost than multiple firms C) One firm uses aggressive pricing to eliminate competitors D) A firm holds a patent on a unique product

• Multiple firms can collaborate to lower prices

• A firm has a monopoly due to high demand

• A single firm controls all distribution channels

• B) A single firm can supply the entire market at a lower cost than multiple firms

In an oligopoly, price rigidity is often explained by which model? A) Perfect competition model B) Kinked demand curve model C) Monopolistic competition model D) Supply and demand model

• B) Kinked demand curve model

• G) Price leadership model

• E) Oligopoly pricing model

• F) Demand-supply equilibrium model

Which of the following is NOT a characteristic of an oligopoly? A) A small number of large firms B) High barriers to entry C) Perfect information for all market participants D) Interdependence among firms in pricing decisions

• G) Minimal market power for firms

• E) A single dominant firm

• C) Perfect information for all market participants

• F) Low product differentiation

In a duopoly, market power is shared between: A) One dominant firm and many small firms B) Exactly two firms controlling the market C) Three or more firms with equal market shares D) The government and one private firm

• B) Exactly two firms controlling the market

• A) A single firm and a government entity

• D) Two firms and a regulatory body

• C) Four firms with varying market shares

The Cournot model of duopoly assumes that each firm: A) Sets its price based on the competitor's price B) Decides its output level assuming the competitor's output remains constant C) Cooperates with the other firm to maximize joint profits D) Ignores the actions of the competing firm entirely

• A) Sets its output based on market demand

• C) Competes on price to gain market share

• D) Adjusts its production based on consumer preferences

• B) Decides its output level assuming the competitor's output remains constant

Which of the following best describes monopolistic competition? A) One firm controls the entire market B) A few large firms dominate the market C) Many firms sell differentiated products with some market power D) All firms sell identical products at the same price

• F) Many firms sell identical products with price variations

• C) Many firms sell differentiated products with some market power

• E) A single firm sets prices for all products

• G) A few firms sell unique products with no competition

In monopolistic competition, firms achieve zero economic profit in the long run because: A) The government regulates prices B) New firms enter the market, reducing demand for existing firms C) Firms collude to keep prices low D) Consumers have no preference for differentiated products

• C) Market demand is perfectly inelastic

• D) All firms produce identical products

• B) New firms enter the market, reducing demand for existing firms

• A) Firms set prices above marginal cost