Economics Test on Market structure and Business
organization.
Section I: Market Structures and Efficiency
1. Why are monopolies so wasteful and inefficient? No competitive pressure on them to
reduce the price; they waste resources and workers don't work as hard as they should.
2. Which market structure has unlimited competition? Why? Perfect Competition; there are
so many firms that suppliers lose the ability to set their own price.
3. In oligopolies, products are generally identical because? There are only 3-4 firms and
their products are usually standardized.
4. Goods that are similar to one another would be sold in what market structure?
Monopolistic competition.
5. Perfect competition markets are the price takers, why? There are no barriers to entry
and consumers are willing to take the price they give.
6. In a monopoly, why are barriers to entry so high? There is no competition, one single
seller, and no substitute goods.
7. Which market structure had the most consumer power? Which has the most efficient
operations? Perfect competition because consumers set the price; Perfect competition
because they don't waste resources.
8. List the 4 types of market structures. Perfect competition, Monopoly, Monopolistic
competition, and Oligopoly.
Section II: Money, Policy, and Global Economics
9. Why do we want money to be scarce? So that the dollar holds a value.
10.Why is inflation bad for the economy? It lowers the value of the dollar and purchasing
power, which determines the value of money.
11.What 3 questions must every economy try to answer? What to produce? How to
produce? For whom to produce it to?
12.The FED is responsible for what? Sets up and directs monetary policy.
13.What happens when a tight money policy is in place? Little government money, interest
rates go up, consumer spending goes down, and unemployment rates go up.
14.What happens when the loose money policy is in place? More cash is flowing, lower
prices, a boost for the economy, and low interest rates.
Section III: Real-World Examples and Characteristics
15.What type of market structure is crude oil in? Oligopoly.
organization.
Section I: Market Structures and Efficiency
1. Why are monopolies so wasteful and inefficient? No competitive pressure on them to
reduce the price; they waste resources and workers don't work as hard as they should.
2. Which market structure has unlimited competition? Why? Perfect Competition; there are
so many firms that suppliers lose the ability to set their own price.
3. In oligopolies, products are generally identical because? There are only 3-4 firms and
their products are usually standardized.
4. Goods that are similar to one another would be sold in what market structure?
Monopolistic competition.
5. Perfect competition markets are the price takers, why? There are no barriers to entry
and consumers are willing to take the price they give.
6. In a monopoly, why are barriers to entry so high? There is no competition, one single
seller, and no substitute goods.
7. Which market structure had the most consumer power? Which has the most efficient
operations? Perfect competition because consumers set the price; Perfect competition
because they don't waste resources.
8. List the 4 types of market structures. Perfect competition, Monopoly, Monopolistic
competition, and Oligopoly.
Section II: Money, Policy, and Global Economics
9. Why do we want money to be scarce? So that the dollar holds a value.
10.Why is inflation bad for the economy? It lowers the value of the dollar and purchasing
power, which determines the value of money.
11.What 3 questions must every economy try to answer? What to produce? How to
produce? For whom to produce it to?
12.The FED is responsible for what? Sets up and directs monetary policy.
13.What happens when a tight money policy is in place? Little government money, interest
rates go up, consumer spending goes down, and unemployment rates go up.
14.What happens when the loose money policy is in place? More cash is flowing, lower
prices, a boost for the economy, and low interest rates.
Section III: Real-World Examples and Characteristics
15.What type of market structure is crude oil in? Oligopoly.
