Market Structures Final Exam Review

Which of the following is a key feature of perfect competition?

• Many buyers and sellers

• Single supplier

• Barriers to entry

• Product differentiation

In a perfectly competitive market, what does it mean for firms to be "price takers"?

• They accept the market-determined price and cannot alter it

• They set the price for the entire market

• They negotiate prices with each buyer

• They can charge any price they want

Which characteristic distinguishes a monopoly from perfect competition?

• Single supplier

• Homogeneous product

• Perfect information

• Free entry and exit

Why is perfect information important in a perfectly competitive market?

• It ensures both buyers and sellers are fully informed about prices, quality, technology, and resource use

• It allows firms to set higher prices

• It creates barriers to entry

• It leads to product differentiation

Explain how efficiency is achieved in a perfectly competitive market.

• Firms produce at the lowest possible cost and in quantities most demanded by consumers

• Firms set prices above market equilibrium

• Firms restrict output to increase profits

• Firms produce unique products for each consumer

What is the significance of free entry and exit in perfect competition?

• It allows firms and resources to move in and out of the market without barriers

• It restricts new firms from entering the market

• It ensures only a single supplier exists

• It leads to product differentiation

How does a monopoly differ from a perfectly competitive market in terms of product supply?

• A monopoly is the only firm supplying a product with no close substitutes

• A monopoly supplies a standardized product with many competitors

• A monopoly allows free entry and exit

• A monopoly has perfect information for all buyers and sellers

Which of the following is NOT a reason why monopolies persist over the long run?

• Legal restrictions

• Economies of scale

• Control of essential resources

• Perfect information symmetry

What does a downward-sloping demand curve mean for a monopoly?

• The monopoly must lower the price to sell more units.

• The monopoly can sell unlimited units at any price.

• The monopoly faces no competition.

• The monopoly always earns increasing revenue per unit.

Which of the following is a criticism of monopolies regarding consumer welfare?

• They often harm consumer welfare by wasting resources and leading to higher prices.

• They always provide the lowest possible prices.

• They encourage maximum innovation without government intervention.

• They guarantee equal access to all resources.