Worksheet Solutions: Forms of Market | Commercial Applications - Class 6 PDF Download

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Q1: In a monopolistic market, the ____________ organization has overall control of the entire market.
Ans: Dominating or controlling

Q2: An oligopoly is a market form with a few firms, none of which can hold the others back from having a ____________ impact.
Ans: Critical

Q3: Perfect competition is characterized by a large number of buyers and sellers who transact homogeneous or similar goods at a ____________ fixed by the market or industry.
Ans: Price

Q4: Monopolistic competition is closely related to the business strategy of ____________ and differentiation.
Ans: Brand separation

Q5: A natural monopoly can exist naturally due to the great start-up costs or incredible ____________ of conducting business in a particular industry.
Ans: Economies of scale

Multiple Choice Questions (MCQ)

Q1: Which of the following market structures is characterized by a single seller with complete control over the market?
(a) Oligopoly
(b) Perfect competition
(c) Monopoly
(d) Monopsony
Ans: (c) Monopoly
In a monopoly, there is a single seller or provider with complete control over the market, allowing them to set prices and supply levels.

Q2: In an oligopolistic market, the concentration ratio measures:
(a) The degree of product differentiation
(b) The size of the market
(c) The piece of the market share held by the largest firms
(d) The number of buyers and sellers in the market
Ans: (c) The piece of the market share held by the largest firms
The concentration ratio measures the market share of the largest firms in an oligopoly.

Q3: What is the defining characteristic of perfect competition?
(a) High barriers to entry
(b) Product differentiation
(c) A large number of buyers and sellers
(d) Complete control over prices
Ans: (c) A large number of buyers and sellers
Perfect competition is characterized by a large number of buyers and sellers, homogeneous products, and no control over prices by individual firms.

Q4: Monopolistic competition is often associated with:
(a) A single dominant seller
(b) Identical products
(c) High barriers to entry and exit
(d) Brand differentiation
Ans: (d) Brand differentiation
Monopolistic competition involves firms offering similar but slightly differentiated products, often through brand differentiation.

Q5: A monopsony is a market situation where:
(a) There is only one buyer
(b) There is a large number of sellers
(c) The market is perfectly competitive
(d) The demand curve is upward-sloping
Ans: (a) There is only one buyer
In a monopsony, there is only one buyer for a particular product or service.

True and False

Q1: True or False: In perfect competition, firms have control over the market price.
Ans: False
In perfect competition, firms are price takers and have no control over the market price. They must accept the price determined by the industry.

Q2: True or False: Monopolistic competition involves a large number of firms selling identical products.
Ans: False
Monopolistic competition involves firms selling similar but slightly differentiated products, often through brand differentiation.

Q3: True or False: Monopoly is a market structure where there are many sellers of a homogeneous product.
Ans: False
Monopoly is a market structure characterized by a single seller with complete control over the market.

Q4: True or False: Oligopoly is a market structure with a large number of small firms.
Ans: False
Oligopoly is a market structure with a few large firms that can significantly impact the market.

Q5: True or False: A natural monopoly can exist due to high start-up costs and economies of scale.
Ans: True
A natural monopoly can naturally exist due to high start-up costs or significant economies of scale, making it difficult for competitors to enter the market.

Short Answer Questions

Q1: Explain the concept of a monopsony and provide an example.
Ans: A monopsony is a market situation in which there is only one buyer for a particular product or service. Unlike a monopoly, which involves a single seller, a monopsony has a single buyer that dominates the market. For example, a company that collects the entire labor force of a town, such as a sugar factory hiring laborers from the entire town to extract sugar from sugarcane, represents a monopsony.

Q2: What is the key characteristic of perfect competition, and how does it affect pricing?
Ans: The key characteristic of perfect competition is a large number of buyers and sellers who transact homogeneous or identical goods at a price determined by the market or industry. This characteristic leads to a horizontal and perfectly elastic demand curve for individual firms. In perfect competition, firms are price takers, meaning they have no control over the price. They must accept the market price, ensuring that prices are uniform and competitive.

Q3: Differentiate between monopoly and monopolistic competition.
Ans: Monopoly and monopolistic competition are two distinct market structures:

• Monopoly: In a monopoly, there is a single seller or provider with complete control over the market. The monopolist sets prices and supply levels. Products are typically unique, and there are no close substitutes. Examples include utility companies.
• Monopolistic Competition: Monopolistic competition involves many firms offering similar but slightly differentiated products. There is low product differentiation, and firms have some control over pricing through brand differentiation. Examples include restaurants and hotels.

Q4: Explain what a natural monopoly is and provide an example.
Ans: A natural monopoly is a type of monopoly that can exist naturally due to high start-up costs or significant economies of scale in a particular industry. These conditions create substantial barriers to entry and exit for potential competitors. An organization with a natural monopoly may be the sole provider of a specific product or service in an industry or geographic area. For example, the utility service industry, which supplies water, electricity, sewer services, and energy distribution to towns and cities across the country, is often considered a natural monopoly due to the infrastructure required and the high costs involved.

Q5: Define the term "price taker" in the context of perfect competition.
Ans: In the context of perfect competition, a "price taker" refers to a firm that has no control over the market price for its product. Instead, it must accept the price determined by the market or industry. The firm's individual actions have no impact on the market price because there are many buyers and sellers of homogeneous products. As a result, the demand curve facing a price-taking firm is horizontal and perfectly elastic, signifying that it can sell any quantity at the prevailing market price but cannot influence that price.