Q1 compilation (Hard)

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Questions and Answers

What is a characteristic of monopoly?

Perfect information

Many sellers and many buyers

One seller and many buyers (correct)

No barrier to entry

What happens in a natural monopoly market situation?

There are many sellers in the market

The government sets the market price

Costs are higher under monopoly than under perfect competition

Costs are lower under monopoly than under perfect competition (correct)

What is a barrier to entry in a monopoly market?

Low transport cost

Perfect information

Severe barrier to entry (correct)

Many close substitutes

What is a characteristic of oligopoly?

Few suppliers of a product or service Signup and view all the answers

What is a result of perfect competition?

Reduced prices for buyers and better services from vendors Signup and view all the answers

What is a characteristic of perfect monopoly?

The single vendor can prevent the entry of all vendors into the market Signup and view all the answers

What is an absence of in a perfect competition market?

Economic friction Signup and view all the answers

What is the term for goods that satisfy human wants and needs?

Consumer Goods Signup and view all the answers

What happens when the supply of a good or service exceeds the demand?

Surplus Signup and view all the answers

According to the law of supply, what happens when prices rise?

Companies increase the supply of goods and services Signup and view all the answers

What type of demand exists when there is an equal change in price and quantity demanded?

Unitary Demand Signup and view all the answers

What is the term for the machinery used in the production of commodities in producer goods?

Capital Goods Signup and view all the answers

What is the term for the performance of any duties or work for another?

Services Signup and view all the answers

What happens when the demand for a good or service exceeds the supply?

Shortage Signup and view all the answers

What is the primary unit of demand in a market?

Buyer or consumer Signup and view all the answers

Which of the following factors does NOT influence demand?

Government Policy Signup and view all the answers

What is a characteristic of perfect competition?

Many sellers and many buyers Signup and view all the answers

Which of the following is NOT a condition of perfect competition?

Monopoly power Signup and view all the answers

What is the term for the situation in which the quantity of a product that consumers are willing to buy equals the quantity that producers are willing to supply?

Market equilibrium Signup and view all the answers

Which of the following is a factor that influences supply?

Price of the product Signup and view all the answers

Study Notes

Factors that Influence Demand

Income, population, taste and preference, price expectation, and price of related goods influence demand.

Market Situations

A market is a mechanism that brings together sellers and buyers of a product, factor of production, or financial security.
It can also refer to a specific place or area where buyers and sellers exchange a well-defined commodity.

Buyer and Seller

A buyer or consumer is the basic consuming or demanding unit of a commodity.
A buyer can be an individual, a household, or a government.
A seller is an entity that makes a product, good, or service available to a buyer in exchange for monetary consideration.

Perfect Competition

Perfect competition is a market situation characterized by many sellers and many buyers, homogeneous products, free market-entry and exit, perfect information, and absence of economic friction.
Each seller and buyer is small enough to not influence the price of the product transacted.
Products are identical in physical attributes and are regarded as identical by buyers.
There are no barriers to entry or exit, and all buyers and sellers have complete information on prices.

Monopoly

Monopoly is a market situation characterized by one seller and many buyers.
There are no close substitutes for the monopolist’s product, and barriers to entry are severe.
A perfect monopoly is when a single vendor can prevent the entry of all vendors into the market.
A natural monopoly is when economies of scale are significant, and costs are minimized when the entire output of an industry is supplied by a single producer.

Oligopoly

Oligopoly exists when there are few suppliers of a product or service, and the action of one will inevitably result in a similar action by the other suppliers.

Goods and Services

Goods are anything that anyone wants or needs, such as consumer goods (food, clothing) and producer goods (raw materials, tools).
Capital goods are machinery used in the production of commodities in producer goods.
Services are the performance of any duties or work for another.

Marketing

Marketing refers to the distribution of goods and services.
Marketing a product refers to advertising and other efforts to promote a product sale.

Supply and Demand

Supply refers to how many of a certain good or service are available for people to purchase.
Demand means how many people wish to buy that good or service.
The law of supply and demand states that prices are determined by the relationship between supply and demand.
If supply exceeds demand, prices will fall, and if demand exceeds supply, prices will rise.

Types of Demand

Elastic demand exists when there is a greater change in quantity demanded as a response to a change in price.
Inelastic demand exists when there is a lesser change in quantity demanded as a response to a change in price.
Unitary demand exists when there is an equal change in price and quantity demanded.

Market Equilibrium

Shortage happens when supply is less than demand.
Surplus happens when supply exceeds demand.
Equilibrium point is when supply is equal to demand.

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Description

Understand the factors that influence demand in a market economy, including income, population, and price expectations. Learn about market situations and the role of buyers and sellers.