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Competitive Markets quiz #1

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  • Why is pure competition considered an unsustainable system in the long run?
    Pure competition is often unsustainable because firms earn zero economic profit in the long run, making it difficult to cover costs and incentivize continued production.
  • The market for which item generally involves pure competition?
    Agricultural products like wheat or corn generally involve pure competition.
  • Which situation is the best example of competition in an economic system?
    Many sellers offering identical products, such as farmers selling wheat, is the best example of competition.
  • What is the most efficient method of production in a competitive market?
    Producing at the lowest possible cost using available resources is the most efficient method.
  • What are the essential features of all competitive markets?
    Many buyers and sellers, and identical products.
  • What are the advantages a market economy offers producers?
    Producers can respond to consumer demand and compete to offer better prices and products.
  • Which of these is a main feature of the market economy?
    Prices are determined by supply and demand.
  • What does it mean for firms to compete in a market?
    Firms strive to attract buyers by offering better prices or products.
  • What are the characteristics of competitive markets?
    Many buyers and sellers, identical products, and price-taking behavior.
  • When does the pressure of rivalry increase in a market?
    When the number of sellers increases and products become more similar.
  • What are the two alternatives to vertical integration?
    Outsourcing and strategic partnerships.
  • Which product exists in a purely competitive market?
    Corn is a product in a purely competitive market.
  • What is not a barrier to entry?
    Identical products are not a barrier to entry.
  • What is pure competition?
    Pure competition is a market structure with many buyers and sellers offering identical products, where all are price takers.
  • How can the competition in food retailing best be characterized?
    Monopolistic competition due to product differentiation.
  • What two conditions must hold for a competitive market to produce efficient outcomes?
    Many buyers and sellers, and identical products.
  • What are the advantages of mass marketing?
    Mass marketing allows firms to reach a large audience and achieve economies of scale.
  • How can a store’s location impact its business?
    A store’s location may impact its access to buyers and its competitiveness.
  • What factors help determine competitive industry structure?
    Number of buyers and sellers, product differentiation, and barriers to entry.
  • Which industry is most likely to exhibit the characteristic of free entry?
    Agricultural markets are most likely to have free entry.
  • Which market is most likely to be perfectly competitive?
    The market for wheat is most likely to be perfectly competitive.
  • What is an advantage of a centralized purchasing department?
    It can negotiate better prices due to bulk buying.
  • What is an example of competitive parity?
    Offering products at the same price and quality as competitors.
  • When a new firm enters an industry, what is the likely effect?
    It increases competition and can drive prices down.
  • What does competition imply?
    Multiple firms striving to attract buyers.
  • Porter's 5 forces include existing competitors. What else do they include?
    New entrants, suppliers, buyers, and substitutes.
  • Why do single firms in perfectly competitive markets face horizontal demand curves?
    Because each firm is a price taker and can sell any quantity at the market price.
  • Which term involves the analysis of markets to identify opportunities and challenges?
    Market analysis.
  • What identifies the resources that can lead to a competitive advantage?
    Unique assets or capabilities.
  • Which type of information does not include learning about competitors' internal operations?
    Public advertising does not reveal internal operations.
  • Which product most closely resembles pure competition?
    Wheat.
  • What is one of the most common ways a company can decrease supplier power?
    Increase the number of suppliers.
  • What is not a recognized advantage to the franchisee of starting a franchise?
    Complete independence in decision-making.
  • Which type of supply process has a mature manufacturing and technology base?
    Standardized mass production.
  • In a perfectly competitive market setting, what is true about firms?
    Firms are price takers and sell identical products.
  • What factors do business organizations use to stay competitive?
    Innovation, cost control, and customer service.