Name __________________________Period _______
Quiz Date / due date ______________
Market Structures
Principles and Practices of Economics
Chapter 7 Study Guide
Directions: Referring to your text, read pages 150-178, and answer the following
questions. Use this as a reference when studying for the chapter quiz, and be prepared to
turn it in for credit prior to taking the quiz.
Section 1:
1. A perfectly competitive market with a large number of firms all producing essentially
the same product is known as ___________________ competition.
2. Do many industries meet all of the conditions for perfect competition? _________
3. The four requirements of a market to be perfectly competitive are:
a. _________________ buyers and sellers
b. Sellers offer identical ______________________
c. Buyers and sellers are well _______________________ about products
d. Sellers are able to enter and exit the market __________________
4. In perfect competition, can one individual or company be powerful enough to
influence the total market quantity or market price? ____________
5. In a perfectly competitive market are there any differences between the products sold
between different suppliers? _________
6. Identify an example of a product that would exist in a perfectly competitive market.
__________________________
7. A product that is considered the same regardless of who makes it is known as a
___________________.
8. Studies show that markets with more firms, and thus more competition have what
kind of prices? _____________________
9. Any factor that makes it difficult for a new firm to enter a market is known as a
_________________ _____ _________________.
10. Common barriers to entry include ___________ - _____ costs and _____________.
11. Expenses that a new business must pay before the first product reaches the consumer
are called ___________ - ______ costs.
Section 2:
12. When a single seller dominates a market, it is known as a _________________.
13. What is the principal condition that allows monopolies to exist?
____________________________________
14. What is the problem with monopolies?
15. Factors that cause a producer’s average cost per unit to fall as output rises are known
as ________________ _______ _______________.
16. A market that runs most efficiently when one larger firm provides all of the output is
known as what kind of monopoly? _______________________
17. What is an example of a natural monopoly? ________________________
18. What must a firm with a natural monopoly do to be able to maintain the monopoly?
____________________________________________________________________
19. When the government creates and regulates a monopoly, it is known as a
_______________________ monopoly. (U.S. Postal Service is an example of this.)
20. When a company has exclusive rights to sell a new good or service for a specific
period of time, they have a _____________________.
21. What do patents guarantee?
22. A contract issued by a local authority that gives a single firm the right to sell its goods
within an exclusive market is known as a ___________________.
23. When a restaurant gives a senior citizen discount or runs a “kids eat for free”
program, this practice is known as ______________ _______________________.
24. With price discrimination, companies can find the customers who need to good the
most and charge them _____________ for that good.
25. For price discrimination to work, a market must meet the following three conditions:
a. The company must have some market _________________, which means that
it cannot be in a highly competitive market.
b. The company must be able to divide the customers into distinct ___________
c. There must be difficult __________________ of the product or service. Price
discrimination works best with goods or services that are consumed on the
spot.
Section 3:
26. In monopolistic competition, each firm hold a monopoly over its own ___________
27. Monopolistically competitive firms sell goods that are similar enough to be
substituted for each other, but are not _______________.
28. The four conditions of a monopolistic competition are:
a. Many _______________
b. Few artificial barriers to _____________________
c. Slight control over _____________
d. Differentiated ____________________
29. When products are made different from other similar products, this is called
_______________________.
30. When the market competition is based upon things other than price such as physical
characteristics, location, service level, advertising, etc. it is known as
____________________ competition.
31. If a monopolistically competitive firm started to earn profits well above their costs,
the following two market trends would take those profits away:
a. Competition would encourage rivals to thing of new ways to ______________
their products to lure customers back.
b. New firms would enter the ______________________
32. A market dominated by a few large, profitable firms is known as an ______________
33. Two examples of oligopolies would be __________________ & ________________
34. An agreement among members of an oligopoly to set prices and production levels is
known as ___________________, which is illegal in the U.S.
35. An agreement among firms to sell at the same or very similar prices is known as
___________________ __________________.
36. An agreement by a formal organization of producers to coordinate prices and
production is known as a ______________________, which is also illegal in the U.S..
Section 4:
37. When a company sells its product below cost to drive competitors out of the market,
it is known as ____________________ pricing.
38. Laws passed to outlaw anticompetitive practices are known as what kind of laws?
_______________________
39. The combination of two or more companies into a single firm is known as a
_________________
40. Which two government organizations watch large firms closely to make sure they do
not unfairly force its competitors out of the market?
_______________
and
41. When the government steps back and no longer controls operating and pricing issues
for an industry or company, it is known as ______________________.
42. What is the purpose of both deregulation and antitrust laws? ___________________
Read the chapter summary on page 178 carefully.
Complete the Key Terms activity on page 178 by putting the correct answers in the lines
below.
1. _____________________________________________
2. _____________________________________________
3. _____________________________________________
4. _____________________________________________
5. _____________________________________________
6. _____________________________________________
7. _____________________________________________