,1. Multiple Choice: Which of the following is a key feature of
a perfectly competitive market?
a) Product differentiation
b) Barriers to entry
c) Many buyers and sellers
d) Price setting by firms
Answer: c) Many buyers and sellers
Rationale: A perfectly competitive market is characterized
by the presence of many buyers and sellers, which ensures
no single buyer or seller can influence market prices.
2. Fill-in-the-Blank: In a monopolistically competitive market,
firms compete on __________ as well as price.
Answer: product differentiation
Rationale: Monopolistic competition involves firms that
sell similar but not identical products, hence they compete
through product differentiation and pricing.
3. True/False: In an oligopoly, the market is dominated by a
small number of large firms.
Answer: True
Rationale: An oligopoly is a market structure where a
small number of firms have significant market power and
can influence market conditions.
, Answers: a) Rational behavior, c) Profit maximization, d)
Perfect information
Rationale: Microeconomic models often assume that
individuals act rationally, seeking to maximize utility or
profits, and have perfect information about the market.
5. Multiple Choice: The concept of 'consumer surplus' refers
to:
a) The difference between the highest price a consumer is
willing to pay and the actual price paid
b) The total utility received from consuming a product
c) The surplus of products in the market
d) The benefit producers receive from selling at a market
price above their cost
Answer: a) The difference between the highest price a
consumer is willing to pay and the actual price paid
Rationale: Consumer surplus is the economic measure of
consumer benefit, calculated by analyzing the difference
between what consumers are willing to pay for a good or
service relative to its market price.
6. True/False: 'Price discrimination' is a pricing strategy
where a firm charges different prices for the same product
to different consumers.
Answer: True
Rationale: Price discrimination occurs when a firm sells
the same good or service at different prices to different
customers, based on their willingness to pay.
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