Questions and Answers
What is pure competition?
The term market structure refers to?
What is industry?
Why is pure competition important?
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How do monopolistic competitors try to make their products stand out?
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How does the profit-maximizing behavior of a monopolistic competitor compare to that of perfect competitors, oligopolies, and monopolies?
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What is oligopoly?
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Name one form of collusion.
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What type of monopoly is based on ownership of a manufacturing method or other scientific process?
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How do monopolies maximize profits?
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Which of the following do economists use to classify markets?
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The market structure called perfect competition is best described as _______.
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What condition differentiates a market of pure competition from one of monopolistic competition?
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If a shoe company pays a professional athlete to wear shoes it makes, it is an example of _______.
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Which market structure is defined by a single producer?
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When would a market failure occur?
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Having too few public goods is evidence of?
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A decrease in _______ tends to reduce the efficient use of ______ resources.
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What does it mean when resources are immobile?
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What is an example of a public good?
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Why are spillover effects, or externalities, symptoms of market failures?
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What is an example of a way to deal with spillovers?
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Why do state and local governments pay for the cost of primary and secondary public education?
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If Project A's ratio of benefits to costs is 1.5, and Project B's ratio is 4, which project should be funded?
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Whenever we want to deal with positive or negative spillovers, involvement from _______ is necessary.
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Which statement is most accurate?
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Which of the following can cause market failure?
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A plant in a small town closes, leaving hundreds of people unemployed. There are jobs available at a similar plant in another state, but many of the unemployed workers are unwilling to move or cannot afford to move. An economist might use this example to _______.
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What happens when some of the costs or benefits associated with production and consumption fall on someone other than the producers or consumers of a product?
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What do externalities indicate?
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Which of these is NOT a way the government can help maintain competitive markets?
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What is a trust?
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What is the Sherman Act?
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What is price discrimination?
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What type of regulatory power does the Federal Trade Commission (FTC) have?
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Not all monopolies are bad. Sometimes it is better to regulate a monopoly rather than break it up if?
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Why was the Consumer Financial Protection Bureau (CFPB) created?
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How much of our lives are affected by government regulation?
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Zoning is an example of?
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Why did the U.S. economy slowly become a modified free enterprise economy?
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Which would an economist say best describes a 'trust'?
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Which of the following is a benefit for monopolies?
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The government does not try to eliminate all monopolies. Why?
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By promoting transparency, the government can improve _______.
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What level of government is most closely associated with zoning?
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Study Notes
Pure Competition
- Defined as a theoretical market structure with identical products, very large numbers of firms, and freedom of entry and exit.
- Economists use this concept to evaluate less-competitive market structures.
Market Structure
- Refers to the nature and degree of competition among firms in the same industry.
- Classifications can involve the number of firms, size of firms, and type of products offered.
Industry and Competition
- Industry represents the supply side of the market.
- Monopolistic competitors utilize nonprice competition like advertising to differentiate their products.
Oligopoly
- A market structure dominated by a few large sellers, where they may engage in collusion, such as price fixing.
- Monopolistic competitors, oligopolies, and monopolies seek to equate marginal cost with marginal revenue to maximize profits.
Monopolies
- Defined by a single producer and can arise in different forms, such as technological, geographic, or government monopolies.
- Monopolies maximize profits by equating marginal cost with marginal revenue.
Market Failures
- Occur when any basic requirements for competitive markets are lacking.
- Evidence includes insufficient public goods and immobility of resources leading to unemployment.
Externalities and Spillover Effects
- Represented by costs or benefits affecting third parties not involved in the market transaction.
- Government engagement is vital when addressing negative externalities through taxation.
Public Goods
- Goods like highways that are available for public use and funded through government spending.
- Lack of mobility in resources can hinder efficient market operation.
Government Role in Markets
- Regulatory powers include preventing monopoly formation, managing anti-competitive practices, and ensuring fair market practices.
- The FTC can issue cease-and-desist orders to prevent unfair business practices.
Consumer Protection
- Established agencies like the Consumer Financial Protection Bureau arose from historical economic crises to protect consumers from predatory practices.
Zoning and Local Regulation
- Zoning serves as a form of local government regulation to control land usage.
- Most facets of life are influenced by government regulations focusing on major industries.
Benefits and Costs of Monopolies
- Monopolies may leverage economies of scale, which can be beneficial, but are often regulated to prevent exploitation of market power.
Trust and Market Combinations
- A trust is a group of firms that collectively restrict competition or control prices, leading to illegal combinations.
- The Sherman Act was a pivotal law aimed at addressing monopolistic practices in the U.S.
Market Dynamics
- The U.S. economy has evolved into a modified free enterprise economy, largely due to consumer demands and political choices regarding economic structure.
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Description
Prepare for your Economics Chapter 7 test with this comprehensive review of key concepts on market structures, including pure competition. This quiz features essential questions that will help reinforce your understanding of theoretical market conditions. Perfect for revision and self-assessment!