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Unit notes and practice questions

Grade 10 Economics unit 4: Market Structures

Everything here is for unit 4 of the Grade 10 Economics textbook: what the chapter covers, the short notes, practice questions with their answers, and the lesson video where one exists.

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Cards
10
Practice questions on unit 4
68–87
The textbook pages for unit 4

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The Temari lesson on unit 4

A short video lesson on this chapter, made by Temari. It loads only when you press play.

Telling the four markets apart · 4 min · 2 past exam questions worked through

Parts of the lesson

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What unit 4 covers

  1. 1.Perfectly Competitive Markets
  2. 2.Pure Monopoly Market
  3. 3.Monopolistically Competitive Market
  4. 4.Oligopoly Market

Short notes for unit 4

The cards filed under this chapter on the Grade 10 Economics page. Open one at a time.

Market StructureNumber of SellersNature of ProductEntry and Exit
Perfect CompetitionLarge numberHomogeneousFree
Pure MonopolySingle sellerNo close substitutesRestricted
Monopolistic CompetitionRelatively largeDifferentiatedFree
OligopolyFew dominantHomogeneous or differentiatedRestricted

When you use it

Use this table to classify and compare market models based on firm numbers, product differentiation, and entry barriers.

Watch out

Monopolistic competition has many sellers and free entry like perfect competition, but firms sell differentiated rather than homogeneous products.

Drafted from Grade 10 Economics, page 68 onwards, then checked twice before it went up

When you use it

Use this rule to determine the relationship between price, demand, average revenue, and marginal revenue for a price-taking firm.

Watch out

The horizontal line where AR = MR = P applies only to the individual competitive firm, not to the market demand curve.

Drafted from Grade 10 Economics, page 68 onwards, then checked twice before it went up

Practice questions on unit 4

10 multiple-choice questions written against this chapter, each with its answer and the reason. Try one before you open the answer.

Question 1

In a perfectly competitive market, what is the shape of the demand curve faced by an individual firm?

  1. A.Vertical line
  2. B.Horizontal line
  3. C.Downward-sloping line
  4. D.Inverse U-shaped curve
Show the answer and why

Answer: B Horizontal line

Why

An individual firm under perfect competition is a price taker and can sell any quantity at the established market price. Therefore, it faces a completely horizontal demand curve.

Question 2

Which market structure consists of a single seller producing a commodity for which there are no close substitutes?

  1. A.Oligopoly
  2. B.Monopolistic competition
  3. C.Pure monopoly
  4. D.Perfect competition
Show the answer and why

Answer: C Pure monopoly

Why

A pure monopoly exists when only one firm produces and supplies a product with no close substitutes, making the firm and the industry one and the same.

Question 3

What is a duopoly?

  1. A.A market with no barriers to entry and exit
  2. B.A market where one single firm controls all strategic inputs
  3. C.A market structure with thousands of small sellers
  4. D.A special case of oligopoly in which there are only two firms
Show the answer and why

Answer: D A special case of oligopoly in which there are only two firms

Why

As defined in the textbook, a duopoly is the simplest form of oligopoly, where exactly two firms operate in the industry.

Question 4

In a perfectly competitive market, what is the correct relationship between price (P), average revenue (AR), and marginal revenue (MR)?

  1. A.P = AR = MR
  2. B.P > AR > MR
  3. C.MR > AR = P
  4. D.AR > P > MR
Show the answer and why

Answer: A P = AR = MR

Why

Because a competitive firm sells every unit at the same market price, the additional revenue from each extra unit equals the price, which also equals average revenue: AR = MR = P.

Question 5

A farmer sells 50 quintals of wheat in a perfectly competitive market at a price of 3,000 birr per quintal. What are the farmer's total revenue (TR) and average revenue (AR)?

  1. A.TR = 150,000 birr and AR = 3,000 birr
  2. B.TR = 150,000 birr and AR = 50 birr
  3. C.TR = 3,000 birr and AR = 150,000 birr
  4. D.TR = 75,000 birr and AR = 1,500 birr
Show the answer and why

Answer: A TR = 150,000 birr and AR = 3,000 birr

Why

Total revenue is price times quantity: 3,000 birr * 50 = 150,000 birr. Average revenue is total revenue divided by quantity: 150,000 / 50 = 3,000 birr (which equals the price).

Question 6

According to the textbook, why does Ambo Mineral Water have monopoly power over its natural mineral water?

  1. A.Due to foreign import quotas
  2. B.Due to ownership of a strategic or key input
  3. C.Due to facing a horizontal demand curve
  4. D.Due to the absence of fixed costs
Show the answer and why

Answer: B Due to ownership of a strategic or key input

Why

Ambo Mineral Water maintains monopoly power because it owns and controls the natural mineral water source, which is a strategic key raw material.

Question 7

Why is the demand curve faced by a monopolistically competitive firm flatter than that of a pure monopoly?

  1. A.Because entry into the market is completely blocked
  2. B.Because the firm sells homogeneous products
  3. C.Because the firm faces rivals that sell close substitute products
  4. D.Because the firm is a price taker
Show the answer and why

Answer: C Because the firm faces rivals that sell close substitute products

Why

A pure monopoly has no rivals, while a monopolistically competitive firm competes against many rivals offering close substitutes, making its demand curve flatter (more price elastic).

Question 8

In an oligopoly market such as the cement or sugar industry in Ethiopia, what key feature means one firm's actions directly affect its competitors?

  1. A.Price taking behavior
  2. B.Free entry and exit
  3. C.Perfect market information
  4. D.Mutual interdependence
Show the answer and why

Answer: D Mutual interdependence

Why

In an oligopoly, there are only a few dominant firms. As a result, they are mutually interdependent: any price or output decision made by one firm directly influences all rival firms.

Question 9

If a monopoly firm faces a linear demand curve given by P = a - bQ, what is the formula for its total revenue (TR)?

  1. A.TR = a - bQ<sup>2</sup>
  2. B.TR = aQ - bQ<sup>2</sup>
  3. C.TR = aQ - bQ
  4. D.TR = a/Q - b
Show the answer and why

Answer: B TR = aQ - bQ<sup>2</sup>

Why

Total revenue is price multiplied by quantity: TR = P * Q. Substituting (a - bQ) for P gives TR = (a - bQ) * Q = aQ - bQ2.

Question 10

A monopolist sells 4 units of a product at 7 birr each (TR = 28 birr). To sell 5 units, the price is lowered to 6 birr each (TR = 30 birr). What is the marginal revenue (MR) of the 5th unit?

  1. A.1 birr
  2. B.6 birr
  3. C.2 birr
  4. D.7 birr
Show the answer and why

Answer: C 2 birr

Why

Marginal revenue is the change in total revenue resulting from selling one extra unit: MR = TR(5) - TR(4) = 30 birr - 28 birr = 2 birr.

The app holds 12 questions on this unit, marked as you go. These are the first 10.

The textbook pages for unit 4

Unit 4 runs from page 68 to page 87 of the Ministry of Education edition.

Ministry of Education edition, English, 193 pages

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All Grade 10 Economics short notes

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