Topic 4: Competition & Market Structures

Read each question and choose the best answer.

Several corn farmers in Iowa meet with their friends each week for breakfast. They talk about their families and about the weather. But soon they engage in more serious discussions about the future demand for corn, the latest prices being offered for their crop, and the cost of their seeds, fertilizer, and machinery.

Which characteristic of a purely competitive market BEST fits the scene described above?

Buyers and sellers are well informed about products.

What type of market structure is shown here? (Pure competition chart-no barriers to entry, no control over price, no variety of goods, many firms)

pure competition

Read each question and choose the best answer.

What characteristic of a purely competitive market does crude oil have?

The product is the same no matter who produces it.

What is likely to be the MAIN barrier to entry into the business shown here? (robot picture)

complex technology

Which of the following industries is most likely to exist in a purely competitive market?

wheat

In the market represented in the graph above, if one of the firms doubled its output, what would happen to the price? (Market Equilibrium in pure competition graph)

The price would remain the same.

Which of the following is an example of a natural monopoly?

a subway system

The main advantage of firms with economies of scale is that

no matter how high their output rises, their average cost continues to fall.

This business operates in Grand Teton National Park. It MOST LIKELY has been granted

a franchise

This company has a monopoly on the service it provides because

it is a natural monopoly; it would not be efficient for more than one company to provide this service.

Drug companies have a monopoly on many brand-name prescription drugs. What does this graph indicate about drug companies' economic decisions during the period shown?

They chose to limit output and charge more for their products.

Why does it make sense for theaters, museums, restaurants, and other facilities to offer discounts to senior citizens?

Many senior citizens would not visit the facility if they had to pay full price

Why is the company that makes these jeans considered both monopolistic and competitive?

It has a monopoly on its own design, but it must compete with other makers of jeans

Which of these factors causes a monopolistically competitive firm to have little control over the price of its product?

the ready availability of substitutes

By being close to the airport, the owner of the business this sign points toward is engaging in a type of

non-price competition.

Which characteristic of non-price discrimination is most likely the reason why people choose to buy this watch?

status or image

What kind of market structure does this pie graph illustrate? (Top music companies 2012)

oligopoly

Which two market structures have relatively high barriers to entry?

oligopoly and monopoly

OPEC Disagreement Could Lead to Lower Gas Prices.

Based on this headline, the writer is LIKELY predicting that one or more members of the OPEC cartel plan to

increase production.

Why did the cartoonist characterize Standard Oil as a kind of monster?

The company took over other businesses and exerted undue influence over politicians.

What was the main goal of the federal actions shown on this timeline? (Key events in Federal Anti Trust Policy)

to ensure economic competition

Which of the following BEST summarizes the change in browser usage between 2000 and 2013?

Microsoft no longer had a near-monopoly in the browser market

Read each question and choose the best answer.

In 1992, the Justice Department and the FTC released guidelines for proposed mergers. The basic theme of the guidelines was that "mergers should not be permitted to create or enhance market power."

Read the excerpt from the text. Why might a firm, through a merger, seek to increase market power?

to gain more control over prices and total market output

California deregulated its wholesale electricity market in 1996. Which of the following BEST summarizes the data in this graph?

After deregulation, California's electricity rates were higher than the national average.

Each letter represents one of the four types of market structure. Where on this continuum would oligopoly be located? (Number of Market Competitors : many<-a b c d ->one

C