U2 Review - Economic Systems, Market & Business Structures

Zoe owns Company X, which manufactures shoes and tries to make them stand out from competitors through unique designs and branding. Lily owns Company Y, which grows bananas that are identical to those produced by other farmers. Based on this scenario, which company is more likely to be a price taker in the market for its goods?

• Company X is more likely to be a price taker because it can engage in non-price competition and differentiate its shoes from those of other producers.

• Company Y is more likely to be a price taker because it produces bananas, which are identical to those produced by other companies, and must accept the market price.

• Company X and Company Y both have significant control over the prices of their goods due to the unique nature of their products.

• Company Y can set its own prices for bananas because it operates in a monopolistically competitive market, while Company X must accept the market price for shoes.

Which of the following is NOT a characteristic of the free market system in the United States?

• Individuals have the freedom to own private property.

• Businesses compete with each other for customers.

• The government sets all prices for goods and services and distributes equally.

• Consumers can choose from a variety of products.

Which characteristic is shared by both pure competition and monopolistic competition markets?

• Firms have significant control over prices in both markets.

• Firms sell completely unique products in both markets.

• Firms can easily enter or exit both types of markets.

• Firms face government regulation in both markets.

What is the main reason firms in monopolistic competition try to make their products appear unique?

• to increase demand for their specific product

• to avoid competition from new firms entering the market

• to allow the government to regulate prices

• to reduce the cost of production

Daniel is considering starting a new business, but he wants to enter a market where it is very difficult for new companies to compete due to high barriers. Which market structure is Daniel looking at?

• monopolistic competition

• monopoly

• oligopoly

• pure competition

Which of the following is true regarding the characteristics of the four main economic systems?

• Traditional economies rely heavily on government planning.

• Market economies allow individuals to make most economic decisions.

• Command economies are based on customs and traditions.

• Mixed economies do not include any government involvement.

Which of the following best describes how production decisions are made in a command economy compared to a market economy?

• Production is determined by consumer preferences in command economies, but by government planning in market economies.

• Government officials make most production decisions in command economies, while consumers and businesses decide in market economies.

• Market economies rely on central planning for production, while command economies use supply and demand.

• Both command and market economies allow producers complete freedom in deciding what to make.

What is one way that competition benefits consumers in a market economy?

• It allows the government to set prices for all goods and services.

• It encourages producers to improve quality and lower prices.

• It ensures that all businesses make the same amount of profit.

• It limits the variety of products available to consumers.

Lily is studying different countries' economies for her social studies class. She wants to rank the three basic types of economic systems based on how much the government regulates them, from the most heavily regulated to the least. Which answer choice correctly ranks these systems for Lily?

• Command, Mixed, Market

• Market, Command, Mixed

• Mixed, Market, Command

• Command, Market, Mixed

Which of the following best describes the characteristics of firms in monopolistic competition?

• Few firms, each producing a unique product.

• Many firms, each producing an identical product.

• Many firms, each producing products that are similar but not identical.

• One firm, producing a product with no close substitutes.