#1
Which market structure is characterized by a large number of sellers and buyers, homogeneous products, and free entry and exit?
Perfect Competition
ExplanationMany sellers and buyers with identical products and easy entry/exit.
#2
In a monopoly, there is a single seller dominating the market. What is the main characteristic of this type of market structure?
Barriers to entry
ExplanationObstacles that prevent new firms from entering the market.
#3
Which of the following is a characteristic of a pure monopoly?
Single seller
ExplanationOnly one firm controls the entire market.
#4
What is a potential downside of monopolies for consumers?
Limited choice and higher prices
ExplanationReduced variety and increased costs for consumers.
#5
Which of the following is an example of a natural monopoly?
Electricity distribution
ExplanationIndustry where one firm can provide the entire output at lower costs.
#6
What is a characteristic of monopolistic competition?
Many sellers and differentiated products
ExplanationNumerous firms with diverse products and some market power.
#7
Which of the following is a barrier to entry commonly associated with a monopoly?
High startup costs
ExplanationExpensive initial investment required to enter the market.
#8
What is the primary goal of a monopoly in terms of pricing?
Maximize profits
ExplanationAdjust prices to achieve the highest possible earnings.
#9
Which market structure is characterized by a small number of sellers, differentiated products, and mutual interdependence among firms?
Oligopoly
ExplanationFew firms with varied products, reacting to each other's actions.
#10
In an oligopoly, a few large firms dominate the market. What is a common strategy in this market structure?
Collusion
ExplanationAgreement among firms to control prices or output.
#11
In monopolistic competition, how do firms differentiate their products?
Branding and advertising
ExplanationCreating unique identities through marketing.
#12
What is a characteristic of a contestable market?
Low exit barriers
ExplanationEase with which firms can enter or exit the market.
#13
In an oligopoly, what is the term used to describe a situation where firms imitate each other's pricing and output strategies without explicit collusion?
Price leadership
ExplanationOne firm sets prices, others follow.
#14
What is an example of an oligopoly in the real world?
International diamond trade
ExplanationSmall number of large firms control the industry.