CXC CXC - Caribbean Examinations Council Economics: Market Structures 1

Question 1

Which market structure is characterized by a single seller controlling the entire supply of a good or service with no close substitutes?

Accepted Answer

Monopoly

Answer

A monopoly exists when one firm dominates the entire market with no close substitutes for its product.

Question 2

In a perfectly competitive market, what happens to a firm's economic profit in the long run?

Accepted Answer

It is driven to zero by new entrants

Answer

In perfect competition, the absence of barriers to entry allows new firms to enter when profits exist, driving economic profit to zero in the long run.

Question 3

Which characteristic distinguishes an oligopoly from other market structures?

Accepted Answer

A few large firms with significant market power

Answer

An oligopoly is defined by a small number of large firms that are mutually interdependent and together control most of the market.

Question 4

What is a natural monopoly?

Accepted Answer

A market where one firm can supply the entire market more cheaply than multiple firms

Answer

A natural monopoly occurs when one firm can produce the total market output at a lower average cost than two or more firms due to economies of scale.

Question 5

Which of the following is an example of non-price competition?

Accepted Answer

Advertising and product differentiation

Answer

Non-price competition involves firms competing through advertising, branding, and product features rather than by lowering prices.

CXC - Caribbean Examinations Council Practice Test

CXC - Caribbean Examinations Council Practice Test

CXC CXC - Caribbean Examinations Council Economics: Market Structures 1