Market Structures
Name the 4 Types of Market Structure
Monopoly
Duopoly
Oligopoly
Monopolistic Competition
Perfect Competition
In a monopoly...
a. there are many firms. b. The product has no close substitutes. c) There are low barriers to entry. d) The firm follows the price in the market.
Which of the following is not true about public goods?
a) They are financed out of taxation. b) They are collectively consumed. c) Consumption by one individual does not diminish the amount available for consumption by others. d) These goods possess property rights, and consumption by one individual excludes others from consuming the good.
A market of few sellers and many buyers is...
Oligopoly
Define non-excludability and non-exhaustibility
non-excludability - a customer cannot be excluded from consuming the good
non-exhaustibility - means that consumption of a public good by one individual does not deprive the other individual usage of that good
All of the following are causes of market failure except
a) the provision of merit goods b) public goods and ‘missing’ markets c) the operation of markets under perfect competition d) the spillover effects of negative and positive externalities
All of the following are consequences of market failure except
a) fewer merit goods being supplied in the market
b) retrenchment
c) a fall in societal welfare
d) unemployment
List 4 Features of Monopoly
a) The firm is the industry
b) No competition (only one firm) c) Unique product with no close substitutes
d) High barriers to entry (e.g. patents, legal restrictions, control of resources)
e)Price maker (sets own price)
f) Imperfect knowledge among buyers and sellers g) Many buyers of the product
List four features of perfect competition.
1. Many buyers and sellers 2. Homogeneous (identical) products 3. Perfect knowledge (everyone knows prices & quality) 4. Freedom of entry and exit 5. Firms are price takers (no control over price) 6. One market price
What is market failure?
the inability of the market to allocate resources effectively
Define Public goods and provide an example
Public goods are goods that are consumed by society.
Public goods are non-excludable and non-exhaustible.
What is a Monopoly
A market with only one seller and many buyers. There is one firm dominating the market for a specific good or service.
What are barriers to entry
The level of difficulty or cost for new firms to enter a market.
Which of the following is a merit good?
a) Soft drinks b) streetlights c) roads d) health care
Monopoly - A market with only one seller and many buyers.
Duopoly - only two firms dominate and control the production of a particular product or service.
Oligopoly - A market with a few large firms dominating the industry.
Monopolistic Competition - A market with many sellers producing differentiated products.
Perfect Competition - A market where there are many buyers and sellers, identical products, and free entry and exit.
Identify 2 differentiations between Perfect Competition and Monopolistic Competition.
1. Monopolistic competition offers similar but not identical products (e.g., clothing brands).
Perfect competition offers identical products (e.g., wheat or rice).
2. Monopolistic competitors are price makers
Perfect competition are price takers.
Which of the following is an example of an externality?
a) a cigarette smoker who gets lung cancer
b) your neighbour enjoying music from his new CD player
c) residents affected by dust from a nearby factory
d) a consumer having an alcoholic drink
List all 5 Consequences of Market Failure
a) Retrenchment
b) Unemployment
c) Economic depression
d) Increase in poverty
e) Decline in Social Welfare