Take this Exam: A-Level Economics: Market Structures | Zestly

Question 1

Which of the following best defines allocative efficiency?

Accepted Answer

The price of a good equals its marginal cost ($P = MC$).

Question 2

Which of the following are common barriers to entry in a monopoly?

Accepted Answer

Economies of scale

Question 3

What does a high concentration ratio, such as a 5-firm concentration ratio of 90%, indicate about a market?

Accepted Answer

The market is highly oligopolistic with a few dominant firms.

Question 4

In an oligopoly, what is the significance of 'interdependence'?

Answer

A firm's pricing strategy depends on the reactions of its rivals.

Answer

Firms are always able to reach a collusive agreement.

Answer

The actions of one firm directly affect the profits of others.

Answer

Firms have no influence over the market price.

Question 5

Why might a monopolist be considered less allocatively efficient than a firm in perfect competition?

Answer

Because the monopolist produces at the minimum of the average cost curve.

Answer

Because the monopolist is forced to set $P = MC$ by the government.

Answer

Because the monopolist restricts output to set $P > MC$.

Answer

Because the monopolist has no incentive to innovate.