Economics Chapter 8 Review

1 A(n) ___________ market has many buyers and sellers that all sell identical goods. Perfectly competitive

2 A type of economic competition where Few sellers Identical or slightly differentiated products Significant barriers to entry Oligopolistic market

3 A clothing store faces this type of competition. Monopolistic competitive

4 A seller that can sell its good only at the equilibrium price would be considered a(n) __________. Price taker

5 Exists when a seller charges different prices to different buyers and the price differences do not reflect cost differences. Price discrimination

6 In which type of market do all firms produce exactly the same type of good? Perfect competition

7 OPEC is an example of a Cartel

8 In which type of market do buyers and sellers have all the relevant information about prices, product quality, and supply? Perfect competition

9 A soybean farmer faces this type of competition. Perfectly competitive

10 In a monopoly, sellers are _________. Price searchers.

11 Airlines operate in this type of market. Oligopolistic.

12 Firms in monopolistic competitive markets are _______. Price searchers

13 A market structure with Many buyers & sellers Identical products Sellers & buyers have all relevant information Easy entry & exit Perfect competition

14 An agreement that specifies that firms will act in a coordinated way to reduce competition among them. Cartel agreement

15 Legislation passed for the stated purpose of controlling monopoly power and preserving and promoting competition. Antitrust law

16 Firms in perfectly competitive markets are __________. Price takers

17 A type of economic competition where There is one seller The product has no close substitutes The barriers to entry are high Monopoly

18 Which market structure relies heavily on advertising to differentiate their products? Monopolistic competition

19 When a single producer has complete control over one kind of good or service, the market structure is called _________. Monopolistic

20 When it comes to determining price, sellers in a perfectly competitive market have __________. No control

21 Firms in oligopolistic markets are __________. Price searchers

22 In a perfectly competitive market, products must be ____________. Identical

23 Making secret agreements that effectively reduce competition. Colluding

24 The market structure that consists of one seller who sells a product that has no close substitutes is called a(n) ____ market. Monopoly

25 A(n) ________ is formed when firms decide to act in a coordinated way to reduce the competition among them and raise their profits. Cartel agreement

26 A type of competition where there are Many buyers and sellers Products are slightly differentiated No barriers to entry Monopolistic competition

27 A _______ exists when the government grants a firm the exclusive right to provide a particular good or service and excludes all others from doing so. Public franchise

28 Things such as patents or copyrights, which make it difficult for a new business to open in a particular market, are considered __________. Barriers to entry

29 Laws meant to control monopoly power and to preserve and promote competition are referred to as _________ laws. Antitrust

30 A firm with such a low average total cost that only it can survive in the market. Natural monopoly

31 A right granted to a firm by government that permits the firm to provide a particular good or service and excludes all others from doing so. Public franchise.

True/False Statements Chapter 8 Review

1 Monopolists are always profitable. False

2 The U.S. automobile industry operates in a perfectly competitive market. False

3 The vast majority of firms face perfect competition. False

4 Cartel agreements are legal in the U.S. False

5 Senior citizens discounts are an example of illegal price discrimination. False

6 Monopolists can charge whatever price they want and still be profitable. False

7 It is difficult for monopolists to know what price to charge. True

8 It is easy for sellers in a perfectly competitive market to raise their prices whenever they feel like it. False

9 Price takers can sell all their goods at the equilibrium price. True

10 Entry into and exit from an oligopolistic market is easy. False

11 When price rises in a perfectly competitive market, new producers will enter the market. True

12 When a firm operates as a monopoly, it means there are high barriers of entry for competitors to enter the market. True

13 A characteristic of the farming industry is the ability of producers to slightly differentiate their products. False

14 Sellers who produce identical products produce the quantity of output at which marginal revenue equals marginal cost. True

15 As the supply of goods in a market increases, it causes the price to fall until firms no longer see an incentive to enter the market. True

16 For a monopolistic competitor, a rise in the price of its good will not cause all its customers to leave it and select the competitor's product. True

Final Question Pure Competition MonopolyMonopolistic Competition Oligopoly Description Price Taker or Price Searcher? Non-price competition?