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ECON MODULE 23: INTRO TO MARKET STRUCTURE EXAM
QUESTIONS
Actual Qs and Ans Expert-Verified Explanation
This Exam contains:
-Guarantee passing score -25 Questions and Answers -format set of multiple-choice -Expert-Verified Explanation
Question 1: Which statement describes a monopoly?
- Many firms produce identical products with no control over the market price.
- Many firms produce differentiated products with control over market price.
- A single firm produces a product with no close substitutes and control over the market
- A single firm produces a product with many close substitutes and limited control over the
price.
market price.
Answer:
- A single firm produces a product with no close substitutes and control over the market price.
- Downward sloping; few
- Upward sloping; many
- Vertical; few
- Downward sloping; many
Question 2: For the monopolistically competitive wild-caught seafood market, the demand curve for any individual firm is _____, and there are _____ producers of seafood.
Answer:
Downward sloping, many
Question 3: What is a natural monopoly?
- A monopoly resulting from one firm's exclusive ownership of a natural resource required to
- A market in which there is only one firm
- A monopoly that results from government issuing patents
- A monopoly that results when one firm is able to produce at a lower cost than multiple firms,
produce a good
giving large firms with higher levels of output an advantage over smaller competitors
Answer:
A monopoly that results when one firm is able to produce at a lower cost than multiple firms, giving large firms with higher levels of output an advantage over smaller competitors Question 4: If all firms in an industry are price takers:
- Each firm can sell at the price it wants to charge, provided it is not too different from the prices
- Each firm takes the market price as given for its output level, recognizing that the price will
- An individual firm cannot alter the market price even if it doubles its output.
- The market sets the price, and each firm can take it or leave it by setting a different price.
other firms are charging.
change if it alters its output significantly.
Answer:
An individual firm cannot alter the market price even if it doubles its output.Question 5: Which scenario is an example of an industry in monopolistic competition?
- The local gas company owns all of the gas lines that supply natural gas and heating to the
- Sprint, AT&T, Verizon, and T-Mobile own a large portion of the U.S. cellular market share.
- Within walking distance from your home, there are a plethora of fast-food restaurants
- Farmers grow navel oranges throughout the United States.
residents in the townof Madison, Wisconsin.
including Koala Express,Cabo Bob's Burritos, Oodles of Noodles, and Hanz's Hearty Hamburgers.
Answer:
Within walking distance from your home, there are a plethora of fast-food restaurants including Koala Express,Cabo Bob's Burritos, Oodles of Noodles, and Hanz's Hearty Hamburgers.Question 6: A perfectly competitive firm is a:
- Price taker.
- Price searcher.
- Cost maximizer.
- Quantity taker.
Answer:
Price taker
Question 7: The ability of a monopolist to raise the price of a product above the competitive
level by reducing the output is known as:
- Product differentiation.
- Barrier to entry.
- Market power.
- Patents and copyrights.
Answer:
Market power Question 8: Market structures are categorized by:
- The number and size of the firms.
- Whether products are differentiated and the extent of advertising.
- The number of firms and whether products are differentiated.
- The size of the firms and the extent of advertising.
Answer:
The number of firms and whether products are differentiated.Question 9: Because of the lack of substitutes, the market for a newly developed and freshly
patented prescription drug is BEST considered to be:
- In perfect competition.
- In monopolistic competition.
- An oligopoly.
- A monopoly.
Answer:
A monopoly Question 10: Identify the market structure that most accurately describes the context in which each good or service is sold. (Monopolistic competition, Oligopoly, Monopoly, Perfect pure competition)
- Retail clothing
- Commercial airline manufacturing
- High quality potatoes
- Locally regulated sewage disposal
- Intercity railways
- The automobile industry
Answer:
- Pure perfect competition: High quality potatoes
- Monopolistic competition: Retail clothing
- Oligopoly: Commercial airline manufacturing & The automobile industry
- Monopoly: Intercity railways & Locally regulated sewage disposal
Question 11: Industries that are made up of many competing producers, each selling a differentiated product, and whose firms earn zero economic profits in the long run are:
- Perfectly competitive.
- Monopolies.
- Oligopolies.
- Monopolistically competitive.
Answer:
Monopolistically competitive.Question 12: The Herfindahl-Hirschman index equals _____ when _____ have/has _____% of the market.
- 10,000; four firms each; 25
- 5,000; three firms each; 33
- 5,000; two firms each; 50
- 100,000; one firm; 100
Answer:
5,000; two firms each; 50
Question 13: In comparison to oligopolies, firms in monopolistic competition
- Differentiate their products.
- Face competition from many other firms.
- Participate in markets where barriers to entry are present.
Answer:
face competition from many other firms.Question 14: Monopolies and monopolistically competitive firms differ in that monopolies...
- Differentiate their products.
- Face competition from many other firms.
- Participate in markets where barriers to entry are present.
Answer:
Participate in markets where barriers to entry are present.Question 15: Classify the assumptions according to whether or not each item is an assumption made under perfect competition (also known as pure competition or competitive industry).
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