Market Structure

What may exist in monopoly but not in perfect competition?

• barriers to entry

• identical products

• market price

• perfect knowledge

What is not usually associated with the existence of a monopoly?

• barriers to entry

• perfect knowledge

• profit maximisation

• small firms

Which characteristic does a firm in perfect competition have in common with a monopoly?

• the ability to exclude rivals

• the benefit of internal economies of scale

• the problem of diseconomies of scale

• the wish to maximise profits

What is true when comparing a monopoly to a perfectly competitive firm?

• Monopolies will have perfect knowledge of their market.

• Monopoly costs are always lower owing to economies of scale.

• Monopoly price is likely to be higher.

• The products that monopolies produce have more limited demand.

A monopoly takes over an industry from competitive firms.

What is not likely to be true about a monopoly compared with a competitive firm?

• A monopoly will earn a higher rate of profit.

• A monopoly will gain a greater share of the market.

• A monopoly will offer a wider choice to the consumer.

• A monopoly will operate on a larger scale of production.

A market changes from perfect competition to monopoly.

What is likely to happen to output and price in this market?

• output decrease price decrease

• output decrease price increase

• output increase price decrease

• output increase price increase

What characteristics are found in a monopoly?

• freedom of entry to the market and a single seller

• freedom of entry to the market and many sellers

• many buyers and a single seller

• many buyers and many sellers

A survey of managers in the USA revealed that most businessmen feel that a company’s

responsibility is ‘to serve the interests of owners, employees, customers and the public’.

The idea of profit maximisation, in contrast, implies that a company’s main responsibility should

be to the

• customers

• employees

• owners

• public

Why is a firm in perfect competition a price taker?

• It has no information about market price.

• Its output is too small to have any effect on market equilibrium.

• There are few barriers to entry.

• There are only a few firms in the industry.

What is not likely in an industry with many small firms?

• high capital costs

• high level of competition

• low barriers to entry

• low research expenditure