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In perfect competition, everyone in the market must accept the market price as given.


One characteristic of perfect competition is that sellers are able to enter and exit the market freely.


In order to price discriminate, sellers must be able to guess the demand curves of different groups, one of which is more elastic than the others.


In perfect competition, many companies compete in an open market to sell products that are similar but not identical.


In oligopoly each firm produces so little of the product compared to the total supply that no single firm can hope to influence price.


In the long run in perfect competition output will reach the point where each firm just covers all of its costs.


When oligopolists cut their prices very low to gain sales it is called a price gamble.


If we define a good or service provided by a company narrowly enough, we can usually find substitute goods from a different source.


A perfectly competitive market will result in more units sold but at a higher market price than in a monopoly.


How much control over price do companies in a perfectly competitive market have?


Complete this sentence: In a monopoly market, the market price will be _____ the price in a perfectly competitive market.

Greater than

What was the chief effect of the Sherman Antitrust Act?

The federal government won the power to prevent monopolies and mergers that interfered with trade between states.

What is the definition of an oligopoly?

two to four firms producing 70 percent to 80 percent of the output

Which of the following is NOT an example of barriers to entry?

In some counties, laws require retail stores to be closed on Sundays.

What is monopolistic competition?

many companies selling similar but not identical products

Why does the government sometimes give monopoly power to a company by issuing a patent?

The company can then profit from their research without competition.

What happens to a monopolistically competitive firm that begins to charge an excessive price for its product?

Consumers will substitute a rival's product.

Which of the following is NOT a condition for perfect competition?

Sellers offer a wide variety of products

How does a natural monopoly function?

A single firm supplies all the output.

Which of these will NOT lead to a monopoly?

antitrust laws

Complete this sentence: In a monopoly market, the market quantity sold will be _____ the quantity sold in a perfectly competitive market.

less than

Sunshine Island has three large supermarkets that supply most of the groceries for the island's population. A gas station also sells a very small selection of groceries. How would you describe the market for groceries on Seaside Island?


A product that is considered the same no matter who makes it is

a commodity

A government issued right to operate a business is a


A combination of two or more companies into a single firm is a


A division of customers into groups depending on how much they will pay for a product is

price discrimination

Any factor that makes it difficult for a new firm to enter an industry is a

barrier to entry

A factor that causes a producer's cost per unit (average cost) to fall as output rises is a(n)

Economy of Scale

In perfect competition, the prices that consumers pay and the revenue that suppliers receive accurately reflect how much the market ____ the resources that have gone into the product.


Market ____ is the ability to control prices and total market output.


Monopolistically competitive firms have some control over their price due to product _____.


Sometimes a new ____ can destroy a natural monopoly, such as when the development of microwave technology ended the AT&T long distance monopoly.


A ___ gives a company exclusive rights to sell a new good or service for a specific period of time.


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