Economics: Types of Market Structures
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Questions and Answers

What is a characteristic of perfect competition in terms of the number of buyers and sellers?

  • One buyer and many sellers
  • Many buyers and sellers, but each has a significant influence on the market
  • A few buyers and many sellers
  • Many buyers and sellers, but each has a tiny fraction of the total market output (correct)
  • What is the primary reason why a single supplier cannot influence the market price in a perfectly competitive market?

  • Because the supplier produces a unique product
  • Because the supplier has limited access to technology
  • Because the supplier is a small player in the market
  • Because the supplier is a tiny fraction of the total market output (correct)
  • What is a characteristic of the product offered in a perfectly competitive market?

  • A unique product that distinguishes one supplier from another
  • A product with a high price elasticity
  • A standardized product that is identical across suppliers (correct)
  • A differentiated product that appeals to a specific niche
  • What is a requirement for entry and exit in a perfectly competitive market?

    <p>Firms can easily enter or leave the industry</p> Signup and view all the answers

    What is an example of a perfectly competitive market?

    <p>The world market for coconuts</p> Signup and view all the answers

    Why do buyers not pay more for one particular supplier's product in a perfectly competitive market?

    <p>Because all suppliers offer an identical product</p> Signup and view all the answers

    What is a characteristic of a perfect competition?

    <p>Many buyers and sellers are present in the market</p> Signup and view all the answers

    What is the term for the ability of a firm to raise its price without losing all its sales to rivals?

    <p>Market power</p> Signup and view all the answers

    What type of entry barrier is represented by a government granting a company exclusive rights to supply a product?

    <p>Legal restriction</p> Signup and view all the answers

    What is the result of economies of scale in a company?

    <p>Lower costs per unit of production</p> Signup and view all the answers

    What is the opposite of perfect competition in terms of market structure?

    <p>Monopoly</p> Signup and view all the answers

    What prevents new firms from entering a monopolized market?

    <p>High barriers to entry</p> Signup and view all the answers

    Study Notes

    Market Structures

    • Market structures can be classified into four types: Perfect Competition, Monopoly, Monopolistic Competition, and Oligopoly.

    Perfect Competition

    • Features:
      • Many buyers and sellers, with each individual buying or selling a tiny fraction of the total market output.
      • Standardized products, identical across suppliers.
      • Buyers are fully informed about price, quality, and availability of products.
      • Sellers are fully informed about availability of resources and technology.
      • Firms can easily enter or leave the industry with no obstacles.
    • Examples:
      • Coconut market, where individual suppliers are a tiny fraction of the market output.
      • Philippine exports of coconut products to the United States.

    Characteristics of Perfect Competition

    • Many buyers and sellers in the market.
    • Each company makes a similar product, with identical products.
    • Buyers and sellers have access to perfect information about price.
    • There are no transaction costs.
    • There are no barriers to entry into or exit from the market.

    Monopoly

    • Definition: A sole supplier of a product with no close substitutes.
    • Origin: Greek word meaning "one seller."
    • Characteristics:
      • Monopolist has more market power than a business in another market structure.
      • Market power: ability to raise price without losing sales to rivals.
      • No market power in perfect competition.

    Barriers to Entry in Monopoly

    • Three types of entry barriers:
      • Legal restrictions: government restrictions on entry, such as patents, licenses, and exclusive rights.
      • Economies of scale: cost advantages of large-scale production.
      • Control of an essential resource: exclusive access to a resource necessary for production.

    Examples of Barriers to Entry

    • Legal restrictions: government-granted monopoly rights to collect garbage, offer bus and taxi services, and supply other services.
    • Economies of scale: car manufacturing, where large-scale production reduces costs per unit.
    • Control of an essential resource: exclusive access to a resource necessary for production.

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    Description

    This quiz covers the characteristics of perfect competition and monopoly market structures in economics. Learn about the key features that distinguish these two market structures.

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