Market Structures and Economic Systems Quiz

Market Structures

• Perfect Competition: Many buyers and sellers, identical products, free entry and exit, price takers.
• Monopoly: Single seller, unique product, significant barriers to entry, price maker.
• Monopolistic Competition: Many sellers, differentiated products, relatively easy entry and exit, some control over price.
• Oligopoly: Few sellers, interdependent, significant barriers to entry, price competition can be fierce or collusive.
• Factors affecting market structure: Number and size of firms, product differentiation, ease of entry and exit, barriers to entry.
• Implications of market structure: Prices, output levels, efficiency, consumer choice.

Economic Systems

• Traditional Economy: Economic decisions based on customs and traditions. Methods of production and distribution are passed down through generations.
  • Advantages: Stable, predictable, strong sense of community.
  • Disadvantages: Resistant to change, lack of innovation, low standards of living.
• Command Economy: The government controls the factors of production and dictates the allocation of resources.
  • Advantages: Potential for rapid development in specific goals, social equality.
  • Disadvantages: Lack of efficiency, lack of incentives, limited consumer choices..
• Market Economy: Individuals and firms own the factors of production and make decisions based on prices.
  • Advantages: Efficiency, innovation, consumer choice.
  • Disadvantages: Inequality, potential market failures (externalities, monopolies).
• Mixed Economy: Combines elements of market and command economies. A blend of private and public ownership of resources, with government regulation in some areas.
• Features of an economic system: Resource allocation, production decisions, distribution of income.

Microeconomics

• Demand and Supply: Describes the relationship between price and quantity demanded/supplied. Market equilibrium is where supply and demand intersect.
• Elasticity of Demand: Measures the responsiveness of quantity demanded to a change in price.
• Elasticity of Supply: Measures the responsiveness of quantity supplied to a change in price.
• Factors affecting Demand and Supply: Prices of related goods, income, tastes and preferences, expectations, number of buyers and sellers, seasonality, government policies.
• Consumer Behaviour and Consumer Surplus: Consumer decisions are based on utility maximization. Consumer surplus is the difference between the price a consumer is willing to pay and the actual price.
• Production Function: The relationship between inputs and outputs.
• Cost of Production: Implicit and explicit costs, economies of scale.
• Market Structures: Perfect competition, monopoly, monopolistic competition, oligopoly.
• Profit Maximization: Firms aim to maximize profits by producing at the point where Marginal Cost (MC) equals Marginal Revenue (MR).
• Market Failure: Occurs when markets fail to allocate resources efficiently, leading to externalities, public goods, imperfect information.

Macroeconomics

• Gross Domestic Product (GDP): Measures the total value of all final goods and services produced within a country in a given period.
• Inflation: A sustained increase in the general price level of goods and services in an economy over a period of time.
• Unemployment: The percentage of the labor force that is actively seeking employment but cannot find it. Different types of unemployment exist (frictional, structural, cyclical, seasonal).
• Economic Growth: An increase in the real GDP over a period of time.
• Fiscal Policy: Government policies related to government spending and taxation.
• Monetary Policy: Actions taken by a central bank to influence the money supply and credit conditions to stimulate or restrain economic activity.
• Exchange Rates: The value of one currency in terms of another currency.
• International Trade: Imports and exports of goods and services between countries.
• Business Cycles: Fluctuations in economic activity, including periods of expansion and contraction.
• Aggregate Demand and Aggregate Supply: Macroeconomic models explaining overall economic activity.

Price Determination

• Market Equilibrium: The price where quantity supplied equals quantity demanded. A stable price that balances supply and demand.
• Factors Affecting Equilibrium Price: Changes in supply and demand curves. Factors that shift supply (input costs, technology, government policies). Factors that shift demand (consumer preferences, income, prices of related goods).
• Price Controls: Price ceilings (maximum price) and price floors (minimum price).
• Impact of Price Controls: Shortages, surpluses, inefficient allocation of resources. Specific examples of such impacts could include shortages of housing, and farm products.
• Role of Government Intervention: Subsidies, taxes. Effects on quantity supplied and demanded.
• Market-Clearing Price: The price at which all available goods and services are consumed and/or sold, based on current supply and demand.
• Price Elasticity of Demand and Supply: Impact on equilibrium prices.