Market Structure and Competition

Market Structure and Competition: Interactive Reading Quiz

Based on Unit 6, Reading 1 from the Macmillan Guide to Economics. After each answer, you will see feedback with an explanation and a reference to the text.

Before You Take the Quiz

Market structure describes how companies compete with each other in a particular market. It is important because it affects price. In some market structures, companies have more control over price. In others, consumers have more control over price.

At one end of the market structure scale is perfect competition. At the other end is pure monopoly. Perfect competition needs several conditions: many small companies, perfect substitutes, complete information, no barriers to entry, and equal access to resources and technology. In perfect competition, companies are price takers.

This quiz checks how well you understand the text. When you check your answers, read the feedback carefully. Each answer includes an explanation and a reference to the paragraph from the text.

Key terms to remember:

• market structure — the way companies compete in a market
• perfect competition — a market where no company can control the price
• pure monopoly — a market with only one supplier
• market share — the part of the market controlled by a company
• perfect substitutes — products that satisfy the same need
• barriers — things that stop new companies from entering the market
• price taker — a company that accepts the price set by the market
• equilibrium — the point where supply and demand are balanced

Discussion

Can you think of a real market that is close to perfect competition? Why do you think perfect competition is very difficult to find in the real world? Share your opinion in the comments.