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A low concentration ratio indicates lesser competition in an industry.
A low concentration ratio indicates lesser competition in an industry.
False
Pure competition is characterized by a single firm dominating the market.
Pure competition is characterized by a single firm dominating the market.
False
In a perfectly competitive market, sellers are considered price takers.
In a perfectly competitive market, sellers are considered price takers.
True
Homogeneous products in pure competition are seen as unique by buyers.
Homogeneous products in pure competition are seen as unique by buyers.
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Free entry and exit into a market is a characteristic of perfect competition.
Free entry and exit into a market is a characteristic of perfect competition.
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In a perfect competition scenario, every buyer and seller has complete information to make decisions.
In a perfect competition scenario, every buyer and seller has complete information to make decisions.
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A huge number of firms in a market allows individual firms to significantly influence market prices.
A huge number of firms in a market allows individual firms to significantly influence market prices.
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A market situation with only one buyer is known as a monopsony.
A market situation with only one buyer is known as a monopsony.
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Low transaction costs are a property associated with perfect competition.
Low transaction costs are a property associated with perfect competition.
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Collusive bidding is a tactic commonly used by cartels to promote competition.
Collusive bidding is a tactic commonly used by cartels to promote competition.
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The standard of living in a nation is unaffected by the benefits of information technology.
The standard of living in a nation is unaffected by the benefits of information technology.
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Oligopsony occurs when there is a large number of buyers in the market.
Oligopsony occurs when there is a large number of buyers in the market.
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In the long run, firms can only adjust their labor inputs and not capital or technology.
In the long run, firms can only adjust their labor inputs and not capital or technology.
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Price fixing is considered a legal practice in most regions.
Price fixing is considered a legal practice in most regions.
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A monopoly can exist in an industry with multiple sellers offering similar products.
A monopoly can exist in an industry with multiple sellers offering similar products.
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The law of diminishing marginal returns states that adding more of one factor of production leads to smaller increases in output after a certain point.
The law of diminishing marginal returns states that adding more of one factor of production leads to smaller increases in output after a certain point.
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Improving growth prospects and employment potentials is a recognized benefit of information technology for nations.
Improving growth prospects and employment potentials is a recognized benefit of information technology for nations.
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Monopolistic markets are characterized by high competition and low barriers to entry.
Monopolistic markets are characterized by high competition and low barriers to entry.
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Customer heterogeneity refers to the uniformity of customer preferences across different markets.
Customer heterogeneity refers to the uniformity of customer preferences across different markets.
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The first stage of production is characterized by negative returns.
The first stage of production is characterized by negative returns.
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Public utilities are an example of a monopolistic industry.
Public utilities are an example of a monopolistic industry.
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In the diminishing returns stage, producers experience an increase in output as they add more units of input.
In the diminishing returns stage, producers experience an increase in output as they add more units of input.
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Cartels benefit consumers by ensuring lower prices and increased transparency.
Cartels benefit consumers by ensuring lower prices and increased transparency.
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The Philippine Competition Act aims to promote unfair competition in the marketplace.
The Philippine Competition Act aims to promote unfair competition in the marketplace.
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Monopolistic competition involves many small firms selling identical products.
Monopolistic competition involves many small firms selling identical products.
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Total cost is the sum of total variable cost and total fixed cost.
Total cost is the sum of total variable cost and total fixed cost.
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In an oligopoly, the actions of one firm can significantly impact others in the industry.
In an oligopoly, the actions of one firm can significantly impact others in the industry.
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Average total cost is calculated by dividing total fixed cost by output.
Average total cost is calculated by dividing total fixed cost by output.
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Cartels are composed of independent businesses that cooperate to increase competition.
Cartels are composed of independent businesses that cooperate to increase competition.
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The marginal cost reflects the cost of producing an additional unit of product.
The marginal cost reflects the cost of producing an additional unit of product.
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The concentration ratio measures the relative size of firms in an industry compared to their competitors.
The concentration ratio measures the relative size of firms in an industry compared to their competitors.
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The monopolist is considered a price taker in the market.
The monopolist is considered a price taker in the market.
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In a competitive market, firms are likely to be price makers.
In a competitive market, firms are likely to be price makers.
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Perfect competition requires firms to sell highly differentiated products.
Perfect competition requires firms to sell highly differentiated products.
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Monopolistic competition features many firms selling slightly differentiated products.
Monopolistic competition features many firms selling slightly differentiated products.
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Limited competition and high barriers to entry characterize monopolistic markets.
Limited competition and high barriers to entry characterize monopolistic markets.
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A natural monopoly arises when multiple firms can produce at lower costs.
A natural monopoly arises when multiple firms can produce at lower costs.
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The demand curve for an individual firm in a competitive market is vertical.
The demand curve for an individual firm in a competitive market is vertical.
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Public utilities are examples of monopolies that have unique production rights.
Public utilities are examples of monopolies that have unique production rights.
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Firms in monopolistic competition do not pay attention to their competitors' prices.
Firms in monopolistic competition do not pay attention to their competitors' prices.
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A geographic monopoly occurs when multiple firms control a market within a specific region.
A geographic monopoly occurs when multiple firms control a market within a specific region.
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A technological monopoly can exist when a company holds exclusive rights to a production process or technology.
A technological monopoly can exist when a company holds exclusive rights to a production process or technology.
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Legal monopolies are established solely through market competition.
Legal monopolies are established solely through market competition.
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In a monopsony, the seller has more control over the pricing of goods due to the presence of a single buyer.
In a monopsony, the seller has more control over the pricing of goods due to the presence of a single buyer.
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An oligopsony consists of a large number of buyers and only a few sellers.
An oligopsony consists of a large number of buyers and only a few sellers.
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In an oligopsony, sellers can negotiate better prices due to their limited number.
In an oligopsony, sellers can negotiate better prices due to their limited number.
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Monopsonists often experience higher prices from wholesalers compared to competitive markets.
Monopsonists often experience higher prices from wholesalers compared to competitive markets.
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Buyers in an oligopsony can dictate various aspects of products including quality and quantity.
Buyers in an oligopsony can dictate various aspects of products including quality and quantity.
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Study Notes
Production Function
- Explains how businesses convert inputs into outputs
- Firms decide how much of each input (labor, raw materials, capital) to use
- Dictates output quantities based on demand
- Focuses on business production methods
Law of Diminishing Marginal Return
- Also known as the law of diminishing returns or variable proportions
- States that increasing a single input while holding others constant will eventually result in smaller increases in output
- Beyond a certain point, additional input yields progressively smaller increases in output.
Three Stages of Production
- Increasing Returns Stage: Output increases as more input is added
- Diminishing Returns Stage: Output increases at a decreasing rate as more input is added
- Negative Returns Stage: Output decreases as more input is added
Short Run Cost Minimization
- Choosing variable input quantities to minimize total costs.
- Variable inputs can be easily changed (e.g. labor, materials)
- Some factors are fixed (cannot be changed) in the short run
Short Run Profit Maximization
- Occurs where marginal revenue equals marginal costs.
- Firms continue producing as long as marginal revenue exceeds marginal cost to increase profits.
- Profit maximization is tied to the revenue and cost balance.
Long Run Profit Maximization
- Firms aim for the highest long-run profit
- Firms can adjust all inputs
- Technological improvements and adjustments to capital and labor are included
- Firms aim to create sustainable competitive advantages
Total Variable Cost
- Cost of all variable inputs
Total Fixed Cost
- Cost of all fixed inputs
Total Cost
- Sum of total variable cost and total fixed cost
Average Variable Cost
- Variable cost per unit of output (total variable cost divided by output)
Average Fixed Cost
- Fixed cost per unit of output (total fixed cost divided by output)
Average Total Cost
- Total cost per unit of output (total cost divided by output)
- Often called average cost
Marginal Cost
- Additional cost of producing one more unit (change in total cost divided by change in output)
Market Structure
- Classification of markets based on the degree and nature of competition.
- Classifications help understand the differences in various markets.
Perfect Competition
- Many buyers and sellers
- Homogenous products (identical)
- Price takers
- Easy entry and exit
Monopoly
- Only one seller
- Unique product (no close substitutes)
- Price maker
- High barriers to entry
Monopolistic Competition
- Many sellers
- Differentiated products (slightly different)
- Some control over price
- Relatively easy entry
Oligopoly
- Few large firms
- Interdependent actions (Firms’ decisions impact others)
- Difficult entry
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Description
Explore the fundamental concepts of production functions and the law of diminishing returns in this quiz. Learn how businesses manage inputs and outputs to maximize efficiency. Understand the three stages of production and the strategies for minimizing short-run costs.
