Question

1. ___________ is a market with substantial barriers to entry.

a.	Monopolistic competition	b.	Oligopoly
c.	Perfect competition	d.	Monopoly

2. ______________ are firms that have market structures which sell homogenous products and differentiated products.

a.	Oligopoly	b.	Monopoly
c.	Monopolistic competition	d.	Perfect competition

3. Which of the following do neoclassical economists assume in all markets?

a.	The selling price is determined by the individual seller.	b.	Firms will maximize profits.
c.	Supply is the only key factor in the market.	d.	Firms will sell at the highest price possible.

4. Long-run equilibrium in the perfectly competitive market does not have which of the following?

a.	No incentive to reduce price	b.	No incentive to change the size of the current plant
c.	Other firms have an incentive to enter the market	d.	No incentive to increase production

Answer 1

Ans 1. d) Monopoly

Monopoly is a market with substantial barriers to entry.

Ans 2. a) Oligopoly

There can be homogenous oligopoly and differentiated oligopoly.

Ans 3. b) Firms will maximize profits.

The neoclassical economists have three central assumptions: people have rational preferences, firms maximize profits and individuals maximize utility and people act independently on the basis of full and relevant information.

Ans 4. c) Other firms have an incentive to enter the market.

In the long run, in perfectly competitive market, there is no incentive for the new firms to enter the market.