#1
Which market structure is characterized by a large number of sellers and buyers, homogeneous products, and free entry and exit?
Perfect Competition
ExplanationPerfect competition features many buyers and sellers with identical products and easy entry and exit.
#2
In which market structure do a few large firms dominate the market, and there are significant barriers to entry?
Oligopoly
ExplanationOligopoly consists of a few dominant firms with barriers to entry.
#3
Which market structure is characterized by one seller dominating the market and having significant pricing power?
Monopoly
ExplanationMonopoly involves a single seller with control over price and supply.
#4
In which market structure does a single firm produce the entire output of a particular product, and there are no close substitutes?
Monopoly
ExplanationA monopoly is characterized by a single firm controlling the market with no close substitutes.
#5
Which of the following is a characteristic of monopolistic competition?
Product differentiation
ExplanationMonopolistic competition involves firms offering differentiated products.
#6
What is a significant advantage of perfect competition for consumers?
Efficient allocation of resources
ExplanationPerfect competition leads to an efficient allocation of resources and lower prices for consumers.
#7
What is a characteristic of a monopolistic competition market structure?
Product differentiation
ExplanationMonopolistic competition involves product differentiation among firms.
#8
Which of the following is an example of a natural monopoly?
Electricity distribution
ExplanationElectricity distribution is often cited as a natural monopoly due to high fixed costs.
#9
What is a cartel in the context of market structures?
A group of firms cooperating to reduce competition
ExplanationA cartel involves firms colluding to restrict competition and increase prices.
#10
What is the primary goal of antitrust laws in the context of market structures?
To prevent unfair business practices and promote competition
ExplanationAntitrust laws aim to prevent monopolistic behaviors and ensure fair competition.
#11
What is a barrier to entry in a market?
Factors that make it difficult for new firms to enter and compete
ExplanationBarriers to entry hinder new firms from entering and competing effectively.
#12
What is the key feature of a duopoly market structure?
Two dominant firms
ExplanationA duopoly consists of two dominant firms influencing market outcomes.
#13
In a perfectly competitive market, what is the shape of the demand curve faced by an individual firm?
Horizontal
ExplanationThe demand curve in perfect competition is horizontal at the market price.
#14
Which market structure is most likely to result in allocative efficiency?
Perfect Competition
ExplanationPerfect competition often leads to allocative efficiency due to price equating marginal cost.
#15
In an oligopoly, what is a strategy where firms cooperate to maximize joint profits, but each has an incentive to cheat on the agreement?
Game theory
ExplanationGame theory models strategic interactions among firms, including collusion and cheating.
#16
What is the concept of price discrimination in the context of market structures?
Charging different prices for the same product to different customers
ExplanationPrice discrimination involves selling the same product at different prices based on customer characteristics.
#17
What is the main drawback of a monopoly in terms of consumer welfare?
Limited choice and higher prices
ExplanationMonopolies can lead to limited choice and higher prices, reducing consumer welfare.
#18
Which market structure is most likely to result in excess capacity?
Monopolistic Competition
ExplanationMonopolistic competition often leads to excess capacity due to product differentiation.