WorksheetsIDENTIFYING MARKETS AND MARKET STRUCTURES
Total questions: 20
Worksheet time: 21mins
The cross elasticity of demand is the percentage change in demand for one good generated by a percentage change in price for another good
TRUE
FALSE
Mutual interdependence is a term economists use to describe any price change made by one firm in an oligopoly that affects the pricing behavior of other firms in the oligopoly
TRUE
FALSE
Firms in a market that is perfectly competitive produce goods that are perfect substitutes for each other
TRUE
FALSE
The most important characteristic that distinguishes one market structure from another is the size of the firms in the market
TRUE
FALSE
A firm in perfect competition is free to set price at whatever level it pleases
TRUE
FALSE
In monopoly, the firm is the industry
TRUE
FALSE
A monopolist’s demand curve will be horizontal at the market price.
TRUE
FALSE
The intended effects of advertising are to increase the market share for a firm and to make the demand for the product more elastic
TRUE
FALSE
Natural monopolies typically have high fixed costs, so only one firm is able to serve the market at a profit
TRUE
FALSE
Brand loyalty describes the willingness of consumers to buy a good at a higher price than the price of its close substitutes
TRUE
FALSE
In oligopoly
firms compete with each other only by raising and lowering quantity because prices are fixed
the fewness of firms creates mutual interdependence in pricing among the firms
the firm is the industry
firms have no difficulty entering and leaving the market
the firm having a natural monopoly sets price for the others
The difference between a market and an industry is that
industries consist of markets producing the same good while markets consist of firms producing substitute goods
industries consist of firms producing the same good while markets consist of industries producing substitute goods
industries are collections of markets while markets are collections of firms
firms make up a market while markets make up an industry
industries are substitutes for markets, but markets are not substitutes for industry
Product differentiation refers to
different prices for the same good
different goods that have identical prices
differences among goods in a market that make them close, but not perfect substitutes for each other
markets that differ from industries because their goods are essentially different
the firm's ability to create different goods while using the same technology and resources
The monopolist's demand curve is ________ whereas the perfectly competitive firm's demand curve is ________.
always downward sloping; always horizontal
always horizontal; always downward sloping
the market demand curve; the industry demand curve
fixed because it represents just one firm; variable because it is only a fraction of the industry's demand
inelastic along its entire range; unit elastic along its entire range
All of the following are true about advertising except that it
plays a more effective role in monopolistically competitive markets than in perfectly competitive markets
is used to reduce product differentiation
is used to make a firm's demand curve more inelastic
is used to increase a firm's market share
is used to reduce consumer sensitivity to price changes
Ordering market structures according to the ease of entry for new firms from easy entry to more difficult entry, we have
monopoly, oligopoly, monopolistic competition, perfect competition
perfect competition, oligopoly, monopolistic competition, monopoly
perfect competition, oligopoly, monopolistic competition, natural monopoly
perfect competition, oligopoly, monopoly, monopolistic competition
perfect competition, monopolistic competition, oligopoly, monopoly
A firm in perfect competition faces a horizontal demand curve for all of the following reasons except that
the firm takes the price as given from the market
the product the firm sells is identical to the product sold by other firms in the market
the firm is unable to influence the market price because of its small size
the firm’s sales are limited so it is impossible for the firm to sell more and lower the price
the firm can sell as much as it wants at the price established in the market
Since movie theaters and video arcades provide highly substitutable services, they may be considered part of the entertainment market
TRUE
FALSE
A relevant market contains a set of goods whose cross elasticities with others in the set are relatively high and whose cross elasticities with goods outside the set are relatively low
TRUE
FALSE
Entry into monopolistic competition or oligopoly is not free, but it is possible
TRUE
FALSE
