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Dr. Katie Sauer - Economics

Intro to Market Structures (ch 14 17) 1. A key characteristic of a competitive market is that a. government antitrust laws regulate competition. b. producers sell nearly identical products. c. firms minimize total costs. d. firms have price setting power. Because the goods offered for sale in a competitive market are largely the same, a. there will be few sellers in the market. b. there will be few buyers in the market. c. only a few buyers will have market power. d. sellers will have little reason to charge less than the going market price. Which of the following statements is not correct? a. Monopolistic competition is similar to monopoly because in each market structure the firm can charge a price above marginal costs. b. Monopolistic competition is similar to perfect competition because both market structures are characterized by free entry. c. Monopolistic competition is similar to oligopoly because both market structures are characterized by barriers to entry. d. Monopolistic competition is similar to perfect competition because both market structures are characterized by many sellers. Free entry means that a. the government pays any entry costs for individual firms. b. no legal barriers prevent a firm from entering an industry. c. a firm's marginal cost is zero. d. a firm has no fixed costs in the short run. When buyers in a competitive market take the selling price as given, they are said to be a. market entrants. b. monopolists. c. free riders. d. price takers. Which of the following firms is the closest to being a perfectly competitive firm? a. a hot dog vendor in New York b. Microsoft Corporation c. Ford Motor Company d. the campus bookstore The market for novels is a. perfectly competitive. b. a monopoly. c. monopolistically competitive. d. an oligopoly. Which of the following statements is correct? a. Both a competitive firm and a monopolist are price takers. b. Both a competitive firm and a monopolist are price makers. c. A competitive firm is a price taker, whereas a monopolist is a price maker. d. A competitive firm is a price maker, whereas a monopolist is a price taker. An oligopoly is a market in which a. there are only a few sellers, each offering a product similar or identical to the products offered by other firms in the market. b. firms are price takers. c. the actions of one seller in the market have no impact on the other sellers' profits. d. there are many price-taking firms, each offering a product similar or identical to the products offered by other firms in the market.

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10. The fundamental source of monopoly power is a. barriers to entry. b. profit. c. decreasing average total cost. d. a product without close substitutes. 11. A monopoly market is characterized by a. many buyers and sellers. b. natural products. c. barriers to entry. d. a Nash equilibrium. Which of the following would be most likely to have monopoly power? a. a long-distance telephone service provider b. a local cable TV provider c. a large department store d. a gas station Which of the following is not an example of a barrier to entry? a. Mighty Mitchs Mining Company owns a unique plot of land in Tanzania, under which lies the only large deposit of Tanzanite in the world. b. A pharmaceutical company obtains a patent for a specific high blood pressure medication. c. A musician obtains a copyright for her original song. d. An entrepreneur opens a popular new restaurant. Which of the following is an example of a barrier to entry? a. Tom charges a higher price than his competitors for his house-painting services. b. Dick obtains a copyright for the new computer game that he invented. c. Harry offers free concerts on Sunday afternoons as a form of advertising. d. Larry charges a lower price than his competitors for his lawn-mowing services. One way in which monopolistic competition differs from oligopoly is that a. there are no barriers to entry in oligopolies. b. in oligopoly markets there are only a few sellers. c. all firms in an oligopoly eventually earn zero economic profits. d. strategic interactions between firms are rare in oligopolies. Because many good substitutes exist for a competitive firm's product, the demand curve that it faces is a. unit-elastic. b. fairly inelastic. c. fairly elastic. d. Not enough information to answer the question. Which of the following is a characteristic of monopolistic competition? a. ownership of a key resource by a single firm b. free entry c. identical product d. patents

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18. Which of the following goods are likely to be sold in a monopolistically competitive market? a. DVDs b. wheat c. corn d. postage stamps 19. A monopolistically competitive industry is characterized by a. many firms selling products that are similar but not identical. b. many firms selling identical products. c. a few firms selling products that are similar but not identical. d. a few firms selling highly different products.