#1
In a perfectly competitive market, what happens if a firm charges a price above the market equilibrium?
It loses customers to other firms.
ExplanationPrice above equilibrium leads to loss of customers due to competitive alternatives.
#2
What is a characteristic of a perfectly competitive market?
There are many buyers and sellers.
ExplanationPerfect competition involves numerous buyers and sellers in the market.
#3
What is the main assumption of perfect competition?
Homogeneous products
ExplanationPerfect competition assumes identical products among firms.
#4
Which factor contributes to market efficiency in a competitive economy?
Information availability
ExplanationAvailability of information enhances market efficiency.
#5
What is the role of competition in a market economy?
To encourage innovation and lower prices
ExplanationCompetition fosters innovation and price reduction in economies.
#6
Which type of market structure has the highest level of competition?
Perfect competition
ExplanationPerfect competition features the most intense level of competition.
#7
What is the primary goal of firms operating in a competitive market?
Maximizing profit
ExplanationFirms aim to maximize profits in competitive markets.
#8
Which concept implies that market prices reflect all available information?
Market efficiency
ExplanationMarket efficiency suggests prices incorporate all available data.
#9
What is the efficient market hypothesis (EMH)?
It suggests that market prices always reflect the true value of assets.
ExplanationEMH posits that market prices accurately represent asset values.
#10
What is a characteristic of monopolistic competition?
Many sellers, differentiated products
ExplanationMonopolistic competition features numerous sellers offering varied products.
#11
What does the term 'price discrimination' refer to?
Selling identical products at different prices to different consumers
ExplanationPrice discrimination involves selling identical goods at varied prices.
#12
What is a characteristic of oligopoly?
Few firms selling identical products
ExplanationOligopoly involves a few firms selling similar goods.
#13
Which factor can lead to market inefficiency?
Government regulation
ExplanationMarket inefficiency can result from government regulations.
#14
What is a feature of a monopolistic competition market structure?
Few firms selling differentiated products
ExplanationMonopolistic competition involves a few firms offering varied goods.
#15
Which form of market efficiency implies that past prices and information cannot be used to consistently outperform the market?
Weak form efficiency
ExplanationWeak form efficiency states past data cannot predict market movements consistently.
#16
Which of the following is NOT a condition for market efficiency according to the efficient market hypothesis?
There are no taxes on investments
ExplanationAbsence of investment taxes is not a requirement for market efficiency.
#17
What does the term 'arbitrage' mean in the context of market efficiency?
Buying and selling securities to exploit price discrepancies
ExplanationArbitrage involves exploiting price differences in asset trading.
#18
Which type of market efficiency suggests that all public information is reflected in asset prices?
Semi-strong form efficiency
ExplanationSemi-strong form efficiency indicates public information influences asset prices.
#19
What is the concept that suggests that markets are not always efficient and may fail to allocate resources optimally?
Market failure
ExplanationMarket failure suggests markets may not optimally allocate resources.