Question 1

Which market structure is characterized by a single seller of a product with no close substitutes?

Accepted Answer

Monopoly. A monopoly exists when one enterprise is the sole supplier of a particular commodity. This market type usually features high barriers to entry for new competitors. The lack of substitutes gives the seller significant control over the market price.

Question 2

What is a market situation with only two sellers of a commodity called?

Accepted Answer

Duopoly. A duopoly is a specific type of oligopoly where only two producers exist in one market. These two firms typically have significant influence over the industry's pricing and output. It serves as the simplest form of limited competition between sellers.

Question 3

In which market form does a firm act as a 'Price Taker'?

Accepted Answer

Perfect Competition. Under perfect competition, firms are price takers because they are too small to influence market prices. Individual sellers must accept the equilibrium price determined by market demand and supply forces. Homogeneous products and many buyers/sellers are key features of this model.

Question 4

Which market type is characterized by 'Product Differentiation'?

Accepted Answer

Monopolistic Competition. Monopolistic competition involves many firms selling products that are similar but not identical. Companies use branding or quality differences to make their products stand out to consumers. This allows firms to have some degree of control over their individual prices.

Question 5

The 'Kinked Demand Curve' is a unique feature associated with which market structure?

Accepted Answer

Oligopoly. The kinked demand curve explains price rigidity observed in oligopolistic market structures. It suggests that competitors will match price cuts but not price increases made by a firm. This theory was primarily developed to explain why prices stay stable despite cost changes.

Market Types — Set 1