Comparing a Perfectly Competitive Market to a Single-Price Monopoly with the Same

question 117

Multiple Choice

Comparing a perfectly competitive market to a single-price monopoly with the same costs,we see that

• A) both markets are equally efficient in their use of resources.
• B) the monopoly market always is more efficient in the use of resources.
• C) the perfectly competitive market achieves efficiency in resource use while the monopoly market does not.
• D) the monopoly market achieves efficiency in resource use while perfectly competitive market does not.
• E) None of the above answers is correct because comparing a perfectly competitive market to a monopoly is impossible.

---

Definitions:

Interest Rate Cap

A financial derivative contract that limits the maximum interest rate a borrower has to pay on a variable-rate loan.

Futures Contracts

Standardized agreements to buy or sell a commodity or financial asset at a future date and price.

Hedge

An investment strategy used to reduce risk by taking positions that offset potential losses in other investments.

Strike Price

The strike price is the price at which the holder of an option contract has the right to buy (for a call option) or sell (for a put option) the underlying asset or security upon exercise of the option.