Economics

Chapter 8 Review

1A(n) ___________ market has many buyers and sellers that all sell identical goods.

Perfectly competitive

2A type of economic competition whereFew sellersIdentical or slightly differentiated products

Significant barriers to entryOligopolistic market

3A clothing store faces this type of competition.

Monopolistic competitive

4A seller that can sell its good only at the equilibrium price would be considered a(n) __________.

Price taker

5Exists when a seller charges different prices to different buyers and the price differences do not reflect cost differences.

Price discrimination

6In which type of market do all firms produce exactly the same type of good?

Perfect competition

7OPEC is an example of a

Cartel

8In which type of market do buyers and sellers have all the relevant information about prices, product quality, and supply?

Perfect competition

9A soybean farmer faces this type of competition.

Perfectly competitive

10In a monopoly, sellers are _________.

Price searchers.

11Airlines operate in this type of market.

Oligopolistic.

12Firms in monopolistic competitive markets are _______.

Price searchers

13A market structure with

Many buyers & sellersIdentical productsSellers & buyers have all relevant information

Easy entry & exit Perfect competition

14An agreement that specifies that firms will act in a coordinated way to reduce competition among them.

Cartel agreement

15Legislation passed for the stated purpose of controlling monopoly power and preserving and promoting competition.

Antitrust law

16Firms in perfectly competitive markets are __________.

Price takers

17A type of economic competition whereThere is one sellerThe product has no close substitutes

The barriers to entry are high

Monopoly

18Which market structure relies heavily on advertising to differentiate their products?

Monopolistic competition

19When a single producer has complete control over one kind of good or service, the market structure is called _________.

Monopolistic

20When it comes to determining price, sellers in a perfectly competitive market have __________.

No control

21Firms in oligopolistic markets are __________.

Price searchers

22In a perfectly competitive market, products must be ____________.

Identical

23Making secret agreements that effectively reduce competition.

Colluding

24The market structure that consists of one seller who sells a product that has no close substitutes is called a(n) ____ market.

Monopoly

25A(n) ________ is formed when firms decide to act in a coordinated way to reduce the competition among them and raise their profits.

Cartel agreement

26A type of competition where there areMany buyers and sellersProducts are slightly differentiated

No barriers to entryMonopolistic competition

27A _______ exists when the government grants a firm the exclusive right to provide a particular good or service and excludes all others from doing so.

Public franchise

28Things such as patents or copyrights, which make it difficult for a new business to open in a particular market, are considered __________.

Barriers to entry

29Laws meant to control monopoly power and to preserve and promote competition are referred to as _________ laws.

Antitrust

30A firm with such a low average total cost that only it can survive in the market.

Natural monopoly

31A right granted to a firm by government that permits the firm to provide a particular good or service and excludes all others from doing so.

Public franchise.

True/False Statements

Chapter 8 Review

1Monopolists are always profitable.

False

2The U.S. automobile industry operates in a perfectly competitive market.

False

3The vast majority of firms face perfect competition.

False

4Cartel agreements are legal in the U.S.

False

5Senior citizens discounts are an example of illegal price discrimination.

False

6Monopolists can charge whatever price they want and still be profitable.

False

7It is difficult for monopolists to know what price to charge.

True

8It is easy for sellers in a perfectly competitive market to raise their prices whenever they feel like it.

False

9Price takers can sell all their goods at the equilibrium price.

True

10Entry into and exit from an oligopolistic market is easy.

False

11When price rises in a perfectly competitive market, new producers will enter the market.

True

12When a firm operates as a monopoly, it means there are high barriers of entry for competitors to enter the market.

True

13A characteristic of the farming industry is the ability of producers to slightly differentiate their products.

False

14Sellers who produce identical products produce the quantity of output at which marginal revenue equals marginal cost.

True

15As the supply of goods in a market increases, it causes the price to fall until firms no longer see an incentive to enter the market.

True

16For a monopolistic competitor, a rise in the price of its good will not cause all its customers to leave it and select the competitor's product.

True

Final QuestionPure

Competition

Monopoly Monopolistic

Competition

Oligopoly

Description

Price Taker or Price Searcher?

Non-price competition?