Question 1

A market is composed of a group of firms:
A) that produce similar products.
B) in the same producing sector, but not the same industry.
C) that produce similar products and compete for the same buyers.
D) that produce their goods and services with the same factors of production.

Accepted Answer

A market is defined by firms that not only produce similar products but also compete for the same group of buyers, which is what makes them part of the same market.

Question 2

Sellers are in the same market if they:
A) are in the same industry.
B) use workers that belong to the same labor union.
C) sell similar products and compete for the same buyers.
D) all of the above.

Accepted Answer

Sellers are considered to be in the same market if they sell similar products and compete for the same buyers, as this directly impacts how they set prices, market their goods, and respond to consumer demand.

Question 3

Which of the following statements is FALSE?
A) Firms in the same market sell similar products.
B) Firms in the same market compete for the same group of buyers.
C) If firms are in the same industry, they must also be in the same market.
D) An industry is made up of a group of firms that produce similar products.

Accepted Answer

Firms in the same industry produce similar products but may target different markets based on geographic location, customer demographics, or product variations, meaning they do not necessarily compete for the same group of buyers.

Question 4

The boundaries of a market are:
A) determined partly by geographic considerations.
B) determined partly by substitutability considerations.
C) not easily determined, and there is often disagreement as to what the exact boundaries are.
D) all of the above.

Accepted Answer

The boundaries of a market are influenced by geographic considerations, substitutability of products or services, and are often subject to debate and disagreement, making all of the provided options correct.

Question 5

Which of the following statements is FALSE?
A) The size of a market determines the competition sellers face.
B) The larger a market, the greater the competition among sellers in it.
C) The definition of a market is uncertain and debatable.
D) Once sellers get together, there is always firm agreement on the boundaries of a market.

Accepted Answer

The statement D is false because the definition and boundaries of a market can be subject to interpretation and disagreement among sellers. Markets can be defined in various ways, such as by the type of product, geographical area, or customer base, leading to potential disputes over what constitutes the market's boundaries.

Question 6

The main determinants of the boundaries of a market are whether:
A) sellers are domestic or foreign-owned corporations.
B) sellers are sole proprietorships, partnerships, or corporations.
C) buyers view the sellers' products as close substitutes for one another, and whether sellers compete for buyers in the same geographic area.
D) none of the above.

Accepted Answer

The main determinants of the boundaries of a market are whether buyers view the sellers' products as close substitutes for one another, and whether sellers compete for buyers in the same geographic area. This is because market boundaries are defined by the level of competition and the substitutability of products from the perspective of the consumer, rather than the ownership structure or legal form of the sellers.

Question 7

Which of the following statements is true?
A) All firms in the same industry must also be in the same market.
B) The geographic boundaries of a market could be local, regional, national, or international.
C) The boundaries of a market are easily determined, and there is virtually no disagreement as to what those boundaries are.
D) All of the above.

Accepted Answer

The geographic boundaries of a market can indeed vary widely, from local to international levels, depending on the nature of the goods or services being offered and the reach of the firms involved. This flexibility in market boundaries allows for a diverse range of business operations and strategies.

Question 8

Generally, you would expect to find:
A) no controversy over the definition of the boundaries of a particular market.
B) the definition of the boundaries of a market to be important in antitrust cases involving monopolization.
C) an inverse relationship between the number of sellers in a market and the amount of competition in that market.
D) all of the above.

Accepted Answer

The definition of market boundaries is crucial in antitrust cases involving monopolization because it helps determine the market share of the companies involved and whether they have a dominating position that could harm competition.

Question 9

The definition of the boundaries of a market can be extremely important in court cases involving:
A) usury laws.
B) antitrust laws.
C) product liability laws.
D) minimum wage laws.

Accepted Answer

The definition of the boundaries of a market is crucial in antitrust laws because it helps determine the level of competition and whether any entities have a dominating market share that could lead to monopolistic practices or anti-competitive behavior.

Question 10

According to Application 13.1, "Defining the Boundaries of a Market: The NCAA Case,"the court:
A) ruled that college football is not subject to the antitrust laws.
B) concluded that if firms are in the same industry they must also be in the same market.
C) heard two definitions of the market: televised live college football, and all broadcast programming.
D) all of the above.

Accepted Answer

The court considered two definitions of the market: televised live college football, and all broadcast programming, reflecting the complexity of defining market boundaries in legal contexts.

Question 11

Market structures are:
A) groupings of firms that use similar processes in creating products.
B) groupings of firms that compete in a limited geographic market.
C) a classification system for grouping goods and services and how they are distributed.
D) models of market situations for grouping sellers according to the degree of competition among them.

Accepted Answer

Market structures are indeed models that categorize sellers based on the level of competition among them, reflecting how markets operate in terms of number of sellers, product differentiation, and ease of entry and exit.

Question 12

The system of market models that classify firms according to number of competitors, product differentiation, and ease of entry into or exit from the market is:
A) market structures.
B) competitive structures.
C) business sector analysis.
D) the North American Industrial Classification System.

Accepted Answer

Market structures refer to the classification of firms based on the number of competitors, the level of product differentiation, and the ease of entry into or exit from the market. These structures include perfect competition, monopolistic competition, oligopoly, and monopoly, each with distinct characteristics regarding competition and product differentiation.

Question 13

Which of the following is NOT a feature used to distinguish among the four market models?
A) The number of sellers in the market.
B) Whether the sellers' products are identical or differentiated.
C) The ease or difficulty with which firms can enter or leave the market.
D) Whether the firms in the market are proprietorships, partnerships, or corporations.

Accepted Answer

The type of business organization (proprietorship, partnership, or corporation) is not a feature used to distinguish among the four market models (perfect competition, monopolistic competition, oligopoly, and monopoly). The key distinguishing features are the number of sellers, product differentiation, and market entry/exit conditions.

Question 14

Which of the following would be willing to operate at a loss over the long run?
A) An oligopolist.
B) A pure monopolist.
C) A monopolistic competitor.
D) None of the above.

Accepted Answer

None of the above entities would be willing to operate at a loss over the long run. An oligopolist, pure monopolist, and monopolistic competitor aim for profits, and sustained losses would prompt strategic changes to return to profitability.

Question 15

Firm A is concerned about the reactions of buyers to the price it sets for its product. Firm B is concerned about the reactions of buyers and its few rivals to the price it sets for its product. Firm C has no control over the price at which its product is sold. Firms A, B, and C are, respectively:
A) a monopolistic competitor, an oligopolist, and a pure competitor.
B) an oligopolist, a monopolistic competitor, and a pure competitor.
C) a monopolistic competitor, a pure competitor, and an oligopolist.
D) a pure competitor, an oligopolist, and a monopolistic competitor.

Accepted Answer

Firm A, concerned about buyer reactions but not competitors, is a monopolistic competitor. Firm B, concerned about both buyers and a few rivals, is an oligopolist. Firm C, with no control over pricing, is a pure competitor.

Question 16

Which is the correct sequence if we are ranking market structures from that with the largest number of sellers to that with the smallest?
A) monopolistic competition, pure competition, monopoly and oligopoly.
B) monopoly, oligopoly, pure competition, and monopolistic competition.
C) oligopoly, monopoly, monopolistic competition, and pure competition.
D) pure competition, monopolistic competition, oligopoly, and monopoly.

Accepted Answer

Pure competition has the largest number of sellers, offering homogeneous products. Monopolistic competition follows, with many sellers but differentiated products. Oligopoly has few sellers, and monopoly has only one.

Question 17

Which is the correct sequence if we are ranking market structures from that where a firm has most control over price to that where a firm has least control?
A) Monopoly, oligopoly, monopolistic competition, pure competition.
B) Monopolistic competition, monopoly, pure competition, oligopoly.
C) Pure competition, monopolistic competition, monopoly, oligopoly.
D) Oligopoly, monopoly, pure competition, monopolistic competition.

Accepted Answer

In a monopoly, a single firm has the most control over the price because it is the only provider of a good or service. An oligopoly, where a few firms dominate, offers some degree of price control but less than a monopoly. In monopolistic competition, many firms sell products that are similar but not identical, leading to some price competition. Pure competition involves many firms selling identical products, where no single firm can influence the market price, resulting in the least control over price.

Question 18

In which of these markets would you expect to find product differentiation emphasized as a competitive strategy tool?
A) Oligopoly.
B) Monopoly.
C) Pure competition.
D) All of the above.

Accepted Answer

In an oligopoly, a few firms dominate the market, and product differentiation is a key strategy they use to gain a competitive edge over each other. This is less relevant in monopolies, where there is only one provider, and in pure competition, where products are largely undifferentiated.

Question 19

Markets with a large number of sellers producing identical products, and that are easy to enter and exit are:
A) oligopolistic.
B) monopolized.
C) purely competitive.
D) monopolistically competitive.

Accepted Answer

Markets that are purely competitive feature a large number of sellers producing identical (or very similar) products, and they are characterized by easy entry and exit for firms. This ensures that no single seller can significantly influence the market price of the product.

Question 20

Which of the following is NOT a characteristic of the purely competitive market model?
A) Products are differentiated.
B) Entry into the market is easy.
C) There is no nonprice competition.
D) There is a very large number of independently acting sellers.

Accepted Answer

In a purely competitive market, products are homogeneous (not differentiated), meaning that no single firm's product is different from another's. This is a key characteristic that distinguishes it from other market structures where product differentiation might occur.

Quiz 13: Competition and Market Structures

A market is composed of a group of firms:

Sellers are in the same market if they:

Which of the following statements is FALSE?

The boundaries of a market are:

Which of the following statements is FALSE?

The main determinants of the boundaries of a market are whether:

Which of the following statements is true?

Generally, you would expect to find:

The definition of the boundaries of a market can be extremely important in court cases involving:

According to Application 13.1, "Defining the Boundaries of a Market: The NCAA Case,"the court:

Market structures are:

The system of market models that classify firms according to number of competitors, product differentiation, and ease of entry into or exit from the market is:

Which of the following is NOT a feature used to distinguish among the four market models?

Which of the following would be willing to operate at a loss over the long run?

Firm A is concerned about the reactions of buyers to the price it sets for its product. Firm B is concerned about the reactions of buyers and its few rivals to the price it sets for its product. Firm C has no control over the price at which its product is sold. Firms A, B, and C are, respectively:

Which is the correct sequence if we are ranking market structures from that with the largest number of sellers to that with the smallest?

Which is the correct sequence if we are ranking market structures from that where a firm has most control over price to that where a firm has least control?

In which of these markets would you expect to find product differentiation emphasized as a competitive strategy tool?

Markets with a large number of sellers producing identical products, and that are easy to enter and exit are:

Which of the following is NOT a characteristic of the purely competitive market model?