Master Market Structures: Perfect Competition, Monopoly, and More

Question 1

In a perfectly competitive market, a profit-maximizing firm should produce at the output level where:

Accepted Answer

Marginal cost equals marginal revenue.

Answer

Average total cost is minimized.

Answer

Price equals marginal revenue.

Answer

Marginal cost equals average total cost.

Question 2

Which of the following is NOT a characteristic of a perfectly competitive market?

Accepted Answer

Price-setting power for individual firms

Answer

Numerous buyers and sellers

Answer

Identical products

Answer

Free entry and exit

Question 3

In a market with numerous buyers and sellers offering identical products, which market structure exists?

Accepted Answer

Perfect competition

Answer

Monopoly

Question 4

Within a monopoly, the firm possesses:

Accepted Answer

Exclusive power to determine prices

Answer

No market power to influence prices

Question 5

Which market structure is characterized by a limited number of influential firms dominating the market?

Accepted Answer

Oligopoly

Question 6

In monopolistic competition, firms:

Accepted Answer

Offer differentiated products and face downward-sloping demand

Answer

Produce homogeneous products and face perfectly elastic demand curves

Question 7

Which factor is NOT considered a barrier to entry in a market?

Accepted Answer

Perfect competition

Answer

Patents

Question 8

Within perfect competition, firms are:

Accepted Answer

Price takers

Answer

Price makers

Question 9

Which scenario exemplifies a natural monopoly?

Accepted Answer

Electric utility

Answer

Automobile manufacturing

Question 10

In a market with substantial economies of scale, which market structure is most likely to emerge?

Accepted Answer

Monopoly

Answer

Oligopoly

Question 11

Which market structure typically leads to the highest level of consumer welfare?

Accepted Answer

Perfect competition

Answer

Oligopoly

Question 12

Which government action is intended to promote market competition?

Accepted Answer

Antitrust laws

Answer

Price controls

Question 13

In a perfectly competitive market, the individual firm's demand curve is:

Accepted Answer

Horizontal

Answer

Upward sloping

Answer

Downward sloping

Answer

Vertical

Question 14

Which of the following is NOT a characteristic of a monopoly?

Accepted Answer

Elastic demand

Answer

Single seller

Answer

High barriers to entry

Answer

Price maker

Question 15

In an oligopoly market, firms are interdependent because they:

Accepted Answer

Have large market shares

Answer

Produce identical products

Answer

Have high fixed costs

Answer

Operate in a perfectly competitive market

Question 16

Which of the following is NOT a benefit of monopolistic competition?

Accepted Answer

Lower prices

Answer

Product differentiation

Answer

More choices for consumers

Answer

Increased innovation

Question 17

A firm's demand curve under perfect competition is said to be:

Accepted Answer

Perfectly elastic

Answer

Perfectly inelastic

Answer

Upward sloping

Answer

Downward sloping

Question 18

In a monopolistically competitive market, firms produce products that are:

Accepted Answer

Slightly differentiated

Answer

Identical

Answer

Highly differentiated

Answer

Completely differentiated

Question 19

Which of the following is NOT a factor that can lead to market failure?

Accepted Answer

Perfect competition

Answer

Externalities

Answer

Public goods

Answer

Information asymmetry

Question 20

Which of the following is not an essential feature of perfect competition?

Accepted Answer

Price-setting power for individual firms

Answer

Numerous buyers and sellers

Answer

Homogeneous products

Answer

No barriers to market entry and exit

Question 21

In a monopoly market, firms possess:

Accepted Answer

All the options mentioned

Answer

Complete control over market price and output

Answer

No competition in the market

Answer

Barriers to market entry

Question 22

Monopolistic competition primarily differs from perfect competition in terms of:

Accepted Answer

Both options A and B

Answer

Firms having some degree of market power

Answer

Product differentiation among firms

Answer

Low barriers to market entry

Question 23

A common pricing strategy implemented by monopolies is:

Accepted Answer

Price discrimination

Answer

Loss leadership

Answer

Cost-plus pricing

Answer

Penetration pricing

Question 24

In a perfectly competitive market, firms maximize profits by producing an output level where:

Accepted Answer

Marginal revenue equals marginal cost

Answer

Average revenue equals average cost

Answer

Price is at its highest point

Answer

Total revenue is at its highest point

Question 25

Government intervention in markets is often practiced to:

Accepted Answer

All the options mentioned

Answer

Foster competition

Answer

Protect consumers

Answer

Address market failures

Question 26

A potential disadvantage of government intervention in markets could be:

Accepted Answer

All the options mentioned

Answer

Lower market efficiency

Answer

Higher prices for consumers

Answer

Unforeseen consequences

Question 27

In a Cournot duopoly model, each firm assumes that the other firm's output level will remain constant when making their own output decision.

Accepted Answer

True

Answer

False

Question 28

Which of the following is NOT a condition for price discrimination?

Accepted Answer

The firm's marginal cost is constant.

Answer

The firm has market power.

Answer

The firm can identify and separate different groups of consumers.

Answer

The firm can prevent resale between groups.

Question 29

A firm in a competitive market will produce output at the point where:

Accepted Answer

Marginal cost equals marginal revenue

Answer

Total revenue equals total cost

Answer

Average cost is minimized

Answer

Profit is maximized

Question 30

In a natural monopoly, market dominance is primarily due to:

Accepted Answer

Economies of scale

Answer

Network externalities

Answer

Government regulations

Answer

Collusion among firms

Question 31

Which of the following is an example of a monopoly?

Accepted Answer

The United States Postal Service

Answer

Apple Inc.

Answer

Google LLC

Answer

Starbucks

Question 32

In an oligopoly, firms have:

Accepted Answer

Significant control over prices

Answer

Little control over prices

Answer

Total control over prices

Answer

No control over prices

Question 33

To foster competition, which government policy can be applied?

Accepted Answer

Antitrust regulations

Answer

Price regulations

Answer

Monetary subsidies

Answer

Protective tariffs

Question 34

Under which market structure do firms attain the optimal societal output level?

Accepted Answer

Perfect competition

Answer

Monopoly

Answer

Oligopoly

Answer

Monopolistic competition

Question 35

In a completely competitive market, the demand curve confronting an individual entity is:

Accepted Answer

Horizontal

Answer

Sloping downward

Answer

Sloping upward

Answer

Indeterminate

Question 36

Which attribute does NOT describe a monopoly?

Accepted Answer

Downward-sloping demand curve

Answer

Exclusive seller

Answer

High barriers to entry

Answer

Price setter

Question 37

In an oligopolistic market, decisions regarding pricing and output by one company are:

Accepted Answer

Influenced by other companies

Answer

Unaffected by other companies

Answer

Exclusive of other companies

Answer

Dominant over other companies

Question 38

Which is NOT an advantage offered by monopolistic competition?

Accepted Answer

Price-taking behavior

Answer

Differentiated products

Answer

Ease of entry and exit

Answer

Low barriers to entry

Question 39

In a perfectly competitive market, at what point does a firm optimize its profits?

Accepted Answer

When marginal revenue equals marginal cost

Answer

When average revenue equals average cost

Answer

When total revenue equals total cost

Answer

When fixed costs are lowest

Question 40

Which governmental measure is used to control monopolies?

Accepted Answer

Antitrust laws

Answer

Price ceilings

Answer

Government subsidies

Answer

Protective tariffs

Question 41

The Herfindahl-Hirschman Index (HHI) gauges:

Accepted Answer

Market concentration

Answer

Market power

Answer

Profitability

Answer

Barriers to entry

Question 42

The concept of consumer surplus refers to the:

Accepted Answer

Difference between the price consumers pay and the price they are willing to pay

Answer

Total profit earned by producers of a product

Answer

Difference between the price producers receive and the price they are willing to accept

Answer

Total amount of money spent by consumers on a product

Question 43

What is the key characteristic that allows a monopoly to exist?

Accepted Answer

High barriers to entry

Answer

Many competing firms

Answer

Differentiated products

Question 44

In an oligopoly, how does the level of market concentration influence firm behavior?

Accepted Answer

Higher market concentration leads to decreased competition, enabling higher prices and lower output.

Answer

Higher market concentration leads to increased competition, resulting in lower prices and higher output.

Answer

Market concentration has no effect on firm behavior in an oligopoly.

Question 45

Which of the following is NOT a feature of a perfectly competitive market?

Accepted Answer

Firms have significant market power.

Answer

Identical products

Answer

Price determined by supply and demand

Answer

Numerous buyers and sellers

Question 46

Which action below could be considered a barrier to entry in an oligopoly?

Accepted Answer

Government-imposed licensing requirements

Answer

Open access to market information

Answer

Presence of many small firms

Answer

High levels of competition

Question 47

In monopolistic competition firms primarily base output and pricing decisions on:

Accepted Answer

Marginal revenue and marginal cost

Answer

Marginal cost alone

Answer

Marginal revenue alone

Answer

Average total cost

Question 48

The Herfindahl-Hirschman Index (HHI) is used primarily to gauge:

Accepted Answer

Market concentration

Answer

Market elasticity

Answer

Market size

Answer

Individual firm's market shares

Question 49

In a perfectly competitive market, the profit-maximizing output for a firm is:

Accepted Answer

When marginal cost equals price

Answer

At the lowest average total cost

Answer

When marginal cost is higher than price

Answer

When marginal cost is below price

Question 50

The equilibrium price in a perfectly competitive market is a result of:

Accepted Answer

The interplay between supply and demand

Answer

Dominance of specific firms

Answer

Government intervention