Test on Market Structures and Competition Law
Market Structures and Competition Law: A Student Guide
Test: Market structure
20 questions
Question 1: Firms in an oligopoly market structure operate with a low degree of interdependence regarding their decision-making.
A. Ano
B. Ne
Explanation: Firms in an oligopoly have a high degree of interdependence, meaning the decisions made by one firm can significantly impact the market and other firms. Each seller must consider other firms in its decision-making concerning price-setting, levels of output, and marketing.
Question 2: Monopolistic competition is a market structure characterized by only a few sellers.
A. Ano
B. Ne
Explanation: Monopolistic competition is characterized by many sellers, although fewer than in perfect competition, not by only a few sellers. Oligopoly is the market structure with few sellers.
Question 3: Cartels in an oligopoly market are formed by businesses to eliminate competition and increase profits for their members.
A. Ano
B. Ne
Explanation: The study materials state that 'Businesses form cartels to eliminate competition and increase profits for its members.'
Question 4: Monopolies consistently incentivize firms to improve product quality and offer a wide variety of choices to consumers.
A. Ano
B. Ne
Explanation: According to the study materials, without competition, monopolies have less incentive to improve the quality of their products, innovate, or offer variety. Consumers therefore get fewer choices and sometimes inferior products.
Question 5: Collusion in an oligopoly market can reduce the need for firms to engage in expensive non-price competition.
A. Ano
B. Ne
Explanation: The study materials state that 'Non - price competition is very expensive for firms in an oligopoly, the need to compete through non - price competition can be eliminated through collusion.'