Market Structures
92 questions· page 1 of 10
A profit-maximising monopoly makes an abnormal profit and decides to reinvest some of this profit to improve its capital stock.
What are the most likely outcomes from this change?
Options
| allocative efficiency | dynamic efficiency | productive efficiency | |
|---|---|---|---|
| A | improves | improves | improves |
| B | unchanged | improves | improves |
| C | improves | unchanged | unchanged |
| D | unchanged | unchanged | improves |
The diagram shows the cost and revenue curves for a natural monopoly.
Which statement is correct?
Options
A P2 and Q2 will achieve both allocative efficiency and productive efficiency.
B P2 and Q1 will achieve productive efficiency but not allocative efficiency.
C P3 and Q3 will achieve allocative efficiency but not productive efficiency.
D P3 and Q3 will achieve both allocative efficiency and productive efficiency.
What would enable a firm to increase its market share in a monopolistically competitive market?
Options
A barriers to entry
B collusion
C lack of competition
D successful advertising
The diagram shows the cost and revenue curves for a natural monopoly.
Which statement is correct?
Options
A P2 and Q2 will achieve both allocative efficiency and productive efficiency.
B P2 and Q1 will achieve productive efficiency but not allocative efficiency.
C P3 and Q3 will achieve allocative efficiency but not productive efficiency.
D P3 and Q3 will achieve both allocative efficiency and productive efficiency.
The tables show the market share of the five largest firms in two separate industries.
industry X
| firm | market share % |
|---|---|
| E | 32 |
| F | 26 |
| G | 22 |
| H | 10 |
| J | 5 |
industry Z
| firm | market share % |
|---|---|
| L | 17 |
| M | 15 |
| N | 14 |
| P | 12 |
| R | 6 |
What does this data suggest is most likely?
Options
A Industry X is highly contestable.
B Industry X is oligopolistic.
C Industry Z has a lower level of output than industry X.
D Industry Z is less competitive than industry X.
A firm has very high fixed costs but low marginal costs of production. It experiences continuous economies of scale so that the minimum efficient scale is not reached until the firm is very large in relation to total market demand.
In which type of market structure would the firm operate?
Options
A monopolistic competition
B monopsony
C natural monopoly
D oligopoly
Oligopoly firms seek to maximise profits.
How will this affect the pricing behaviour of oligopoly firms involved in a non-collusive market?
Options
A A price is fixed for the product that never changes throughout its life cycle.
B Firms will agree on the level of advertising costs for a new product.
C If one firm raises its price, other firms will maintain their original price to increase their market share.
D If one firm lowers its price, other firms will increase their price.
Which statement is correct for a firm classed as a natural monopoly?
Options
A It will always operate in the public sector and earn normal profits.
B It will have high barriers to entry and be the dominant producer.
C It will easily benefit from external economies of scale.
D It will have higher average costs than a monopolistically competitive firm.
Assuming the absence of price controls, in which industry is an individual firm least likely to be able to alter the price at which it sells its product?
Options
A air transportation
B hairdressing
C steel production
D wheat farming
A market structure in which a small number of firms face competition from potential entrants.
What does this describe?
Options
A a contestable market
B a monopoly
C monopolistic competition
D perfect competition