#1
Which of the following is a characteristic of a perfectly competitive market?
Many buyers and many sellers
ExplanationPerfect competition involves numerous buyers and sellers ensuring a level playing field.
#2
In perfect competition, what is the shape of the demand curve faced by a firm?
Horizontal
ExplanationThe demand curve is horizontal in perfect competition, indicating price uniformity.
#3
What is a characteristic feature of a monopoly market structure?
Single seller with unique product
ExplanationA monopoly has a single seller with exclusive control over a unique product.
#4
Which market structure exhibits the highest degree of market power?
Monopoly
ExplanationMonopoly has the highest market power due to its exclusive control over the market.
#5
What is a characteristic of a perfectly competitive market regarding product differentiation?
No product differentiation
ExplanationPerfect competition lacks product differentiation among sellers.
#6
What is the main characteristic of a monopolistic competition market structure?
Few sellers, differentiated products
ExplanationMonopolistic competition features a limited number of sellers offering differentiated products.
#7
In oligopoly, what do firms often engage in to avoid price wars and maintain market share?
Collusion
ExplanationOligopolistic firms may collude to prevent price wars and secure market share.
#8
In monopolistic competition, what happens to a firm's demand curve in the long run as new firms enter the market?
It becomes more elastic.
ExplanationAs new firms enter, monopolistic competition firms' demand curve becomes more elastic.
#9
What is a characteristic behavior of firms in a duopoly market?
Collusive pricing behavior
ExplanationFirms in a duopoly may engage in collusive pricing behavior to avoid competition.
#10
What is a distinguishing feature of monopolistic competition compared to perfect competition?
Product differentiation
ExplanationProduct differentiation distinguishes monopolistic competition from perfect competition.
#11
What does a kinked demand curve model in oligopoly suggest about the firm's reaction to price changes?
The firm matches price increases but ignores price decreases.
ExplanationThe kinked demand curve in oligopoly implies firms match price increases but ignore decreases for stability.
#12
In a natural monopoly, what causes economies of scale?
Large fixed costs and decreasing average costs
ExplanationEconomies of scale in a natural monopoly result from large fixed costs and decreasing average costs.
#13
What factor contributes to the stability of a cartel in an oligopolistic market?
High barriers to entry
ExplanationHigh barriers to entry contribute to the stability of a cartel in an oligopolistic market.
#14
What factor could lead to the dissolution of a natural monopoly?
Decreasing economies of scale
ExplanationThe dissolution of a natural monopoly may occur with decreasing economies of scale.
#15
What factor could lead to the breakdown of collusion in an oligopoly?
Frequent changes in market demand
ExplanationCollusion in oligopoly may break down due to frequent changes in market demand.