econ 910 chapter 8 – Flashcards

1. In which market model would the number of firms be the fewest? A. Monopolistic competition. B. Pure competition. C. Pure monopoly. D. Oligopoly.

2. Under which market model are the conditions of entry into the market easiest? A. Pure competition. B. Pure monopoly. C. Monopolistic competition. D. Oligopoly.

3. Which of the following is not a basic market model? A. Pure competition. B. Pure enterprise. C. Oligopoly. D. Monopoly.

4. Which characteristic would best be associated with pure competition? A. Few sellers. B. Price taker. C. Non-price competition. D. Product differentiation.

5. Which of the following is a feature of a purely competitive market? A. Price differences between firms producing the same product. B. Significant barriers to entry into the industry. C. The industry's demand curve is perfectly elastic. D. Products are standardised or homogeneous.

6. Which of the following is true under conditions of pure competition? A. There are differentiated products. B. The market demand curve is perfectly elastic. C. No single firm can influence the market price by changing its output. D. Firms that cannot make pure or economic profits go bankrupt.

7. Which of the following is a reason for why there is no advertising, by individual firms, under pure competition? A. Firms produce a homogeneous product. B. The quantity of the product demanded is very large. C. The market demand curve cannot be increased. D. Firms do not make long-run profits.

8. 'Barriers to entry': A. exist in economic theory, but not in the real world. B. usually result in pure competition. C. are often the result of government regulation. D. are typically the result of wrongdoing on the part of a firm.

9. Which of the following is a characteristic of monopolistic competition? A. Standardised product. B. A relatively small number of firms. C. The absence of non-price competition. D. Relatively easy entry.

10. Into which of the following market structures is entry least difficult? A. Pure monopoly. B. Monopolistic competition. C. Oligopoly. D. Regulated monopoly.

11. Which one of the following is not a form of product differentiation for the monopolistically competitive firm? A. Brand names and trademarks. B. Promotion and packaging. C. Location and accessibility. D. Standard hours and procedures.

12. A monopolistically competitive industry is like a purely competitive industry in that: A. each industry produces a standardised (i.e. homogeneous) product. B. non-price competition is a feature of both industries. C. neither industry has significant barriers to entry. D. firms in both industries face a horizontal demand curve.

13. In an oligopolistic market there are: A. many buyers. B. few buyers. C. few sellers. D. many sellers.

14. A unique feature of an oligopolistic industry is: A. low 'barriers to entry'. B. standardised products. C. diminishing marginal returns. D. mutual interdependence between firms.

15. An oligopolistic market is consistent with: A. all firms making economic profits. B. a small number of firms in the industry. C. the existence of 'barriers to entry'. D. all of the above.

16. A major distinction between a monopolistically competitive firm and an oligopolistic firm is that: A. one is a price-taker and the other is a price-maker. B. a recognised interdependence exists between firms in one industry, but not in the other. C. one always produces differentiated products, and the other always produces a homogeneous product. D. one necessarily faces a downward-sloping demand curve, and the other a horizontal demand curve.

17. Which of the following would not be considered as non-price competition? A. Cadbury offers two chocolate bars for the price of one. B. Qantas offers upgrade certificates to certain frequent flyer members. C. ANZ Bank offers a new, lower, home loan rate. D. Target stores offer a money-back guarantee on all purchases.

18. 'Barriers to entry' refers to: A. any obstacles that stop firms from successfully offering lower entry prices to consumers. B. any obstacles that stop firms from successfully moving into a market. C. any obstacles that stop firms from successfully offering a higher entry price to consumers. D. any obstacles that stop firms from successfully launching 'take-over bids' for other firms.

19. In which of the following market structures is there mutual interdependence, with respect to price-output policies? A. Pure monopoly. B. Oligopoly. C. Monopolistic competition. D. Pure competition.

20. Which answer describes an industry comprised of a very large number of sellers that are producing a standardised product? A. Monopolistic competition. B. Oligopoly. C. Pure monopoly. D. Pure competition.

21. Which answer describes an industry comprised of a small number of firms, each of which considers the potential reactions of its rivals in making price-output decisions? A. Monopolistic competition. B. Oligopoly. C. Pure monopoly. D. Pure competition.

22. Which of the following statements is true? A. Goodwill advertising is more common for oligopolists who are producing a standardised product. B.Goodwill advertising is when an oligopolist tries to convince the public that their product is better than other products. C. Goodwill advertising is used when negligible differences exist among various oligopolists' product offerings. D. Goodwill advertising is not a feature of an oligopolistic industry.

23. A contestable market is one in which: A. both entry and exit from the market can be achieved at very low cost. B. barriers to entry exist. C. pricing interdependence exists. D. goodwill advertising exists.

24. Patents and licences are 'barriers to entry'. A. True B. False

25. Monopolistically competitive firms exist due to high 'barriers to entry'. A. True B. False

26. Annual design and model changes are a form of non-price competition. A. True B. False True False

27. Patents and copyrights were deliberately established by the government in order to reduce oligopoly and monopoly power. A. True B. False

28. If technological advance necessitates the existence of a few large producers that can achieve efficient lowcost production, this will push market structures towards monopolistic competition. A. True B. False

29. There is no incentive for monopolistically competitive firms to engage in non-price competition because the number of firms in the industry is so large than no individual firm is large enough to affect the sales of others in the industry. A. True B. False

30. A pure monopolist: A. is a price maker. B. is a price taker. C. faces a limited number of immediate competitors. D. faces non-price competition.

31. Which of the following is not a characteristic of monopolistic competition? A. Standardised product. B. A relatively large number of firms. C. The existence of non-price competition. D. Relatively easy entry.