Practice Questions
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Which of the following is a characteristic of a monopoly?
In a monopoly, one company is the only seller. Other options are incorrect because Some might think many sellers can exist in a monopoly; People might...
In a competitive market, how does a shift in the demand curve to the right affect consumer surplus?
When demand increases, more people want to buy a product. Other options are incorrect because Some might think that consumer surplus always goes down ...
In a monopolistic market structure, how does the firm determine its equilibrium price given its market power?
A monopolistic firm sets its price where its extra income from selling one more unit (marginal revenue) equals the extra cost of making that unit (mar...
In a monopoly market structure, how does the price-setting behavior of the firm affect market efficiency compared to a perfectly competitive market where firms are price takers?
In a monopoly, the firm sets prices higher than the cost to produce one more unit. Other options are incorrect because Some think monopolies are bette...
In a monopolistically competitive market, what determines the equilibrium price when firms are maximizing profits, and how does this relate to market efficiency?
The equilibrium price is found where the cost to make one more item (marginal cost) equals the money made from selling one more item (marginal revenue...
In a perfectly competitive market, which of the following characteristics is true?
In a perfectly competitive market, many buyers and sellers exist. Other options are incorrect because Some might think that a competitive market has m...
Which of the following is a characteristic of a monopoly?
In a monopoly, one company is the only seller. Other options are incorrect because Some might think many sellers can exist in a monopoly; People might...
Which of the following is a characteristic of an oligopoly market structure?
In an oligopoly, only a few companies control most of the market. Other options are incorrect because Some might think many companies mean competition...
In a market characterized by __________, firms have some control over pricing due to product differentiation, yet many substitutes exist, resulting in competitive pressures.
In monopolistic competition, many companies sell similar but not identical products. Other options are incorrect because A monopoly means one company ...
In a small town, a new bakery opens up, entering a market already dominated by two other bakeries. The new bakery offers unique recipes and personalized cakes. Given this scenario, which market structure best describes the situation, and how might it affect pricing strategies for all bakeries involved?
This situation is called monopolistic competition. Other options are incorrect because In perfect competition, all businesses sell the same product an...
Arrange the following market structures in order of increasing market power held by firms: A) Perfect Competition → B) Monopolistic Competition → C) Oligopoly → D) Monopoly.
In perfect competition, many firms sell the same product, so no one has power. Other options are incorrect because This option suggests that a monopol...
In which market structure do firms have some control over pricing but also face competition from similar products?
In monopolistic competition, many firms sell similar but not identical products. Other options are incorrect because In perfect competition, all firms...
If a perfectly competitive market experiences an increase in demand, leading to higher prices and profits, what is the primary underlying cause of firms entering the market in response?
When demand goes up, prices rise. Other options are incorrect because Some might think higher demand raises costs for everyone; It's a common idea tha...
In a monopolistically competitive market, how do firms typically respond to an increase in demand?
When demand goes up, firms want to sell more. Other options are incorrect because Some might think firms raise prices and supply less; It's a common m...
Perfect competition : many sellers :: monopoly : ?
In a monopoly, there is only one seller in the market. Other options are incorrect because This answer suggests that there are many different products...
Which of the following characteristics are typically associated with perfect competition? Select all that apply.
Perfect competition has many sellers, low barriers to entry, identical products, no price control, and perfect information. Other options are incorrec...
A market structure is characterized by a single seller dominating the market with significant barriers to entry and unique product offerings. Which market structure does this example best represent, and why?
A monopoly has one seller who controls the entire market. Other options are incorrect because In perfect competition, many sellers offer similar produ...
Master Market Structures Overview
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