Sheet (12)

Structures of Markets Dr. Sarah Serag

I. Multiple Choice Questions (MCQ)
1) Which of the following is not a characteristic of a perfectly competitive market structure?
A) There are a very large number of firms that are small compared to the market.
B) All firms sell identical products.
C) There are no restrictions to entry by new firms.
D) There are restrictions on exit of firms.

2) Which of the following is not a characteristic of a monopolistically competitive market

structure?
A) There is a large number of independently acting small sellers.
B) All sellers sell products that are differentiated.
C) There are low barriers to entry of new firms.
D) Each firm must react to actions of other firms.

3) Which of the following is a characteristic of an oligopolistic market structure?

A) There are few dominant sellers.
B) Each firm sells a unique product.
C) It is easy for new firms to enter the industry.
D) Each firm need not react to the actions of rivals.

4) Which of the following is a characteristic of a monopoly?

A) It is easy for new firms to enter the market.
B) There is only one seller in the market.
C) The product is not unique.
D) The firm has no control over price.

5) Perfect competition is characterized by all of the following except

A) heavy advertising by individual sellers.
B) homogeneous products.
C) sellers are price takers.
D) a horizontal demand curve for individual sellers.

6) A very large number of small sellers who sell identical products imply
A) a multitude of vastly different selling prices.
B) a downward sloping demand curve for each seller's product.
C) the inability of one seller to influence the price.
D) chaos in the market.

7) Which of the following is the best example of a perfectly competitive industry?

A) the wheat market
B) the steel market
C) the electricity market
D) the airplane market

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 Sheet (12)
Structures of Markets Dr. Sarah Serag
8) The price of a seller's product in perfect competition is determined by
A) the individual seller.
B) a few of the sellers.
C) market demand and market supply.
D) the individual demander.

9) Both buyers and sellers are price takers in a perfectly competitive market because
A) the price is determined by government intervention and dictated to buyers and sellers.
B) each buyer and seller knows it is illegal to conspire to affect price.
C) both buyers and sellers in a perfectly competitive market are concerned for the welfare of others.
D) each buyer and seller is too small relative to others to independently affect the market price.

10) One reason why the "fast-casual" restaurant market is competitive is that
A) demand for "fast -casual" food is very high.
B) it is trendy and therefore is likely to have a customer following.
C) barriers to entry are low.
D) consumption takes place in public.

11) The key characteristics of a monopolistically competitive market structure include

A) many small (relative to the total market) sellers acting independently.
B) all sellers sell a homogeneous product.
C) barriers to entry are strong.
D) sellers have no incentive to advertise their products.

12) All of the following characteristics are common to both monopolistic competition and perfect
competition except
A) firms act to maximize profit.
B) entry barriers into the industries are low.
C) the market demand curves are downward-sloping.
D) firms take market prices as given.

13) Which of the following characteristics is common to monopolistic competition and perfect
competition?
A) Firms produce identical products.
B) Entry barriers into the industry are low.
C) Each firm faces a downward-sloping demand curve.
D) Firms take market prices as given.

14) A monopoly is the only seller of a product

A) with many substitutes.
B) without a close substitute.
C) with a perfectly inelastic demand.
D) without a well-defined demand curve.

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 Sheet (12)
Structures of Markets Dr. Sarah Serag
15) A monopoly is characterized by all of the following except
A) there are only a few sellers, each selling a unique product.
B) entry barriers are high.
C) there are no close substitutes to the firm's product.
D) the firm has market power.

16) A monopoly differs from monopolistic competition in that

A) a monopoly has market power while a firm in monopolistic competition does not have any
market power.
B) a monopoly can never make a loss but a firm in monopolistic competition can.
C) in a monopoly there are significant entry barriers but there are low barriers to entry in a
monopolistically competitive market structure.
D) a monopoly faces a perfectly inelastic demand curve while a monopolistic competitor faces an
elastic demand curve.

17) An oligopolistic industry is characterized by all of the following except

A) existence of entry barriers.
B) the possibility of reaping long-run economic profits.
C) firms pursuing aggressive business strategies, independent of rivals' strategies.
D) production of standardized or differentiated products.

18) An oligopolist differs from a perfect competitor in that

A) there is cutthroat competition in perfect competition but little competition in oligopoly because
firms have significant market power.
B) firms in an oligopoly do not produce homogeneous products while firms in perfect competition
do.
C) the market demand curve for a perfectly competitive industry is perfectly elastic but it is
downward-sloping in an oligopolistic industry.
D) there are no entry barriers in perfect competition but there are entry barriers in oligopoly.

17) Which of the following is the best example of an oligopolistic industry?

A) the wheat market
B) the pharmaceutical industry
C) public education
D) the beauty products industry

18) All of the following are examples of oligopolistic markets except

A) the broadcasting industry.
B) aircraft manufacture.
C) college bookstores.
D) seafood restaurant chains.

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Structures of Markets Dr. Sarah Serag
19) A characteristic found only in oligopolies is
A) break-even level of profits.
B) interdependence of firms.
C) independence of firms.
D) products that are slightly different.

20) Producing a homogeneous product occurs in which of the following industries?

A) oligopoly, monopolistic competition, and perfect competition
B) perfect competition only
C) oligopoly and perfect competition
D) monopolistic competition and perfect competition

21) What is the incentive for a firm to join a cartel?

A) to be able to earn profits in the long run but not in the short run
B) to be able to earn larger profits than if it was not part of the cartel
C) to completely insulate itself from competition
D) to produce a larger amount of output than if it was not part of the cartel

22) If the painting firms in a city sign a contract outlining a pricing plan, they are involved in
A) price competition.
B) a legal form of business contract in the United States.
C) collusion.
D) price regulation.

23) Hewlett-Packard will not raise the prices of its personal computers without first considering
how Dell might respond. This is evidence of
A) interdependence.
B) collusion.
C) cutthroat competition.
D) price fixing.