Unit 2: Market Structures Quiz

Perfect competition is characterized by

• large number of buyers and sellers

• diverse products

• sellers acting together to set prices

• uninformed buyers and sellers

A monopoly that is based on the ownership or control of a manufacturing method, process, or other scientific advance is a

• geographic monopoly

• government monopoly

• natural monopoly

• technological monopoly

A decrease in competition within an industry often results in

• more efficient resource allocation

• lower prices

• a firm wielding economic and political power

• increased output

What letter on the graph represents the proper location for the market structure “monopoly”?

• W

• Y

• X

• Z

What letter on the graph represents the proper location for the market structure “oligopoly”?

• W

• Y

• X

• Z

When Gillette Co. unveiled Mach3, the world’s first triple-blade razor, it took a bold gamble.... Mach3 cartridges were to sell for around $1.60 each. Skeptics predicted the personal-care giant would soon be forced to cut that price. But the price is holding and Mach3 has become the No. 1 blade and razor. What’s the secret to pricing power? For starters, a commitment to innovation. Gillette spent nearly $1 billion on the development and initial marketing of Mach3.

Source: Business Week, February 1, 1999

Based on the passage, what type of monopoly is helping Gillette Co. maintain a high price for its Mach3 razor?

• natural monopoly

• technological monopoly

• government monopoly

• geographic monopoly

What market structure does the letter “R” in the table represent?

• perfect competition

• pure monopoly

• oligopoly

• monopolistic competition

“Pure monopoly” should replace what letter in the table?

• P

• R

• Q

• S

Under perfect competition,

• products are similar but not identical

• numerous restrictions prevent firms from entering the market

• no seller can sell a product above the prevailing market price

• a single seller can affect price

When a major car company lowers its prices, other car makers will probably

• maintain existing prices

• go out of business

• raise their prices

• lower their prices