Ch. 7: Market Structures
Matching
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Identifying Key Terms
Match each term with the correct
statement below. a. | economies of scale | f. | price war | b. | trust | g. | antitrust laws | c. | franchise | h. | market power | d. | oligopoly | i. | differentiation | e. | barrier to entry | j. | perfect
competition |
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1.
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a market structure in which a few large firms dominate a market
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2.
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a market structure in which a large number of firms all produce the same
product
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3.
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a series of competitive price cuts that lowers the market price below the cost
of production
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4.
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factors that cause a producer’s average cost per unit to fall as output
rises
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5.
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an illegal grouping of companies that discourages competition
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6.
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the right to sell a good or service within an exclusive market
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7.
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making a product unlike other products
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8.
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any factor that makes it difficult for a new firm to become part of a
market
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Multiple Choice
Identify the
choice that best completes the statement or answers the question.
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9.
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When is a buyer NOT willing to spend a lot of time and energy researching the
market?
a. | when buying a large quantity of goods | b. | when there are many identical products
available | c. | when the savings to be made are small | d. | when prices vary but quality is the
same |
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10.
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What kind of market runs most efficiently when one large firm supplies all of
the output?
a. | a natural monopoly | c. | perfect competition | b. | a network | d. | imperfect
competition |
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11.
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What is one kind of monopoly that the U.S. government generally permits?
a. | the telephone company | c. | low-price gasoline | b. | professional sports leagues | d. | certain kinds of
medications |
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12.
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How does a company arrange to sell its products to people who are unwilling to
pay the top price for them?
a. | by allowing rebates to some preferred customers who buy a lot of
goods | b. | by charging each customer the maximum amount they are willing to
pay | c. | by charging different prices according to the group to which the buyer
belongs | d. | by changing the product and selling a lesser one to people who are unwilling to pay
for the top product |
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13.
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What is monopolistic competition?
a. | one company selling the identical product under different names | b. | one company selling
several different products under different names | c. | a very few companies selling identical
products | d. | many companies selling similar but not identical
products |
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14.
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Which of the following is NOT a form of nonprice competition?
a. | location | c. | advertising | b. | physical characteristics | d. | discounts |
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15.
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What happens to a monopolistically competitive firm that begins to charge an
excessive price for its product?
a. | The firm will go out of business. | b. | Consumers will substitute a rival’s
product. | c. | Consumers will boycott the product. | d. | The government will regulate the
price. |
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16.
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When the government deregulates a product or service, what happens to it?
a. | The product or service is available to more people. | b. | The product or
service becomes cheaper. | c. | Some government regulations over the industry
are eliminated. | d. | Government control over the industry is stopped. |
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17.
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Cartels are difficult to operate for which of the following reasons?
a. | They work only if members keep to their agreed output. | b. | They are illegal
worldwide. | c. | Firms in a cartel are likely to lose money. | d. | The products are
perfectly competitive. |
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18.
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Why does the government sometimes give monopoly power to a company by issuing a
patent?
a. | The government does not want competition for the product. | b. | The company makes a
product better than anyone else’s. | c. | The company pays the government for the
patent. | d. | The company can then profit from their research without
competition. |
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Short Answer
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Reading a Table| Market Structures | | | Perfect
Competition | Monopolistic
Competition | Monopoly | | Number of firms | Many | Many | One | | Barriers to entry & exit | None | High | Complete | | Control over prices | None | Little | Complete | | Variety of goods | None | Some | None | | | | |
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19.
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What kind of variety is available in a monopolistically competitive
market?
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20.
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What are the barriers to entry in a monopoly?
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21.
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What kind of market do firms have the least control over prices?
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Essay
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Critical Thinking
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22.
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Identifying Alternatives Does a merger of two companies leave the
consumer better or worse off?
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23.
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Distinguishing False from Accurate Images Give an example of the way that
the Internet has reduced start-up costs for some businesses.
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24.
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Determining Relevance How can the invention of new technology alter a
market structure?
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