#1
In economics, what does the term 'competitive market' refer to?
A market with many buyers and sellers
ExplanationCharacterized by numerous buyers and sellers, promoting market competition.
#2
What is the primary goal of a firm in a competitive market?
Maximize profit
ExplanationFirms aim to maximize profits by optimizing production and cost-efficiency.
#3
What is the primary objective of antitrust laws?
To prevent unfair business practices
ExplanationLaws designed to promote fair competition by preventing anti-competitive behaviors.
#4
In a monopolistic competition, what does product differentiation refer to?
Making products distinct from competitors
ExplanationDistinguishing products to create perceived differences in a crowded market.
#5
Which of the following is an example of a natural monopoly?
Electricity distribution
ExplanationA situation where a single provider is most efficient, as in electricity distribution.
#6
What is the key characteristic of a perfectly competitive market?
Many sellers with no market power
ExplanationNumerous sellers with identical products and no individual market influence.
#7
In a perfectly competitive market, what is the shape of the firm's demand curve?
Horizontal
ExplanationThe demand curve is flat (horizontal) due to identical product substitutes.
#8
What is the condition for long-run equilibrium in a perfectly competitive market?
Marginal cost equals average total cost
ExplanationLong-run equilibrium is achieved when marginal cost equals average total cost for all firms.
#9
What is the main feature of an oligopoly market?
Few sellers selling differentiated products
ExplanationA market dominated by a small number of sellers offering differentiated products.
#10
What is a characteristic of a monopoly market structure?
One seller with significant market power
ExplanationA single seller holds substantial market influence, often the exclusive provider.
#11
What is a common strategy employed by firms in an oligopoly market?
Collusion
ExplanationSellers cooperating to manipulate market conditions and maximize joint profits.
#12
What is a characteristic of a monopolistically competitive market?
Few sellers selling differentiated products
ExplanationSeveral sellers with differentiated products and limited market power.
#13
What is a characteristic feature of monopolistic competition?
Few sellers selling differentiated products
ExplanationSeveral sellers offering varied products with some market power.
#14
What is the relationship between marginal revenue and marginal cost at profit maximization in a perfectly competitive market?
Marginal revenue equals marginal cost
ExplanationProfit maximization occurs when marginal revenue equals marginal cost.
#15
What is the effect of an increase in demand on the equilibrium price and quantity in a perfectly competitive market?
Price and quantity increase
ExplanationIncreased demand results in higher equilibrium price and quantity.
#16
What happens to the demand curve of a perfectly competitive firm if there is an increase in the price of a substitute good?
Shifts left
ExplanationAn increase in substitute price causes the demand curve of a perfectly competitive firm to shift left.