Economics · Unit 7

Markets, Prices and Competition

How markets and competition work

Prices are a signalling system. They carry information about scarcity and desire that no central planner could collect, which is the strongest argument for markets.

The unit covers what a market is, how prices guide choices, competition, monopoly, and price controls.

This unit breaks down into 23 short steps and 119 questions, starting at difficulty 1 and building to 5. Below you can see exactly what it covers, how the path is structured, and worked examples with explanations.

Steps: 23
Questions: 119
Difficulty: 1-5

What this unit covers

What a Market Is
How Prices Guide Choices
Price Controls
Competition
Monopoly

Where this fits

Follows Supply and Demand.

Where people slip

Price controls have predictable side effects. A ceiling below the market price produces shortages and a floor above it produces surpluses, whatever the intention.

How the unit is structured

Markets, Prices and Competition runs as 23 short steps that unlock in order. 17 are practice rounds and 6 are challenge rounds that pull together everything before them. Questions start at difficulty 1 and climb to 5 as you progress.

Step 1 · easierStep 23 · harder

Challenge rounds

Example questions

30 real questions from this unit, with the answer and the reason behind it, grouped by what they practise. There are 119 in the unit altogether.

Competition

Multiple choiceLevel 1
1. In business, competition means that ____.
- several sellers try to win the same customerscorrect
- there is only ever one shop in the world
- no one is allowed to sell anything
- buyers are banned from choosing
Competition is when sellers rival each other to attract buyers.
Choose all that applyLevel 2
2. Which of these can happen when many shops compete for the same customers? (Choose all that apply.)
- Prices may go downcorrect
- Quality may improvecorrect
- Shoppers get more choicescorrect
- Buyers are forced to buy from just one shop
Competition tends to push prices down and quality up while giving buyers more choice.
Fill the blankLevel 2
3. A seller in perfect competition must accept the market price, so we call that seller a price ____.
- takercorrect
- maker
- floor
- tag
In perfect competition each seller is a price taker, accepting the market price.
Odd one outLevel 2
4. Which of these is NOT a common result of strong competition between sellers?
- One seller controlling everything alonecorrect
- Lower prices for buyers
- Better quality products
- More choices for shoppers
Competition usually spreads sales among many sellers, not one seller controlling everything.
Match the pairsLevel 4
5. Match each market structure to a key feature.
Answer: Perfect competition = Many firms, identical products; Monopolistic competition = Many firms, differentiated products; Oligopoly = A few dominant firms; Monopoly = One firm, no close substitutes
Market structures differ mainly in how many firms there are and how similar their products are.
Put in orderLevel 4
6. Order these market structures from the MOST sellers to the FEWEST sellers.
Answer: Perfect competition -> Monopolistic competition -> Oligopoly -> Monopoly
Perfect competition has the most sellers, monopolistic competition many, oligopoly only a few, and monopoly just one.

How Prices Guide Choices

Choose all that applyLevel 2
7. Which of these can a price act as a signal for? (Choose all that are true.)
- Telling buyers when something is expensivecorrect
- Telling buyers when something is cheapcorrect
- Helping people decide how much to buycorrect
- Telling you the buyer's favorite color
Prices signal how costly or cheap things are, which guides how much people buy.
Fill the blankLevel 2
8. When a price goes up, buyers usually want to buy ____ of that item.
- lesscorrect
- more
- all
- double
Higher prices signal buyers to buy less, while lower prices invite them to buy more.
Match the pairsLevel 2
9. Match each price change to how buyers usually react.
Answer: Price goes up = Buy less; Price goes down = Buy more; Price stays the same = Buy about the same
Prices act like signals that guide how much people choose to buy.
Multiple choiceLevel 2
10. What does a price mainly tell people in a market?
- How much something costs to buy or sellcorrect
- What the weather will be tomorrow
- How old the seller is
- The name of the shop owner
A price is the amount of money needed to buy something, and it guides people's choices.
Put in orderLevel 2
11. Put these steps in order for how a higher price guides a buyer.
Answer: Buyer sees a higher price -> Buyer thinks it costs more now -> Buyer decides to buy less
A price is a signal, so a higher price leads many buyers to buy less.
Odd one outLevel 4
12. The market price of eggs rises sharply. Which reaction does NOT fit how prices normally guide behavior?
- Buyers rush out to buy far more eggs than beforecorrect
- Some buyers switch to cheaper substitutes
- Egg producers plan to supply more
- Households start using eggs a bit more sparingly
A higher price normally leads buyers to cut back and substitute while producers plan to make more, so buyers rushing to buy far more does not fit.

Monopoly

Choose all that applyLevel 2
13. Which of these describe a monopoly? (Choose all that are true.)
- There is just one main sellercorrect
- The seller has a lot of control over pricecorrect
- There are many rival sellers to choose from
- Buyers have few or no other places to buy the productcorrect
A monopoly means one seller with strong control over price and few choices for buyers.
Fill the blankLevel 2
14. A market controlled by a single seller is called a ____.
- monopolycorrect
- partnership
- auction
- discount
A monopoly is one seller controlling a product with no close rivals.
Guess the numberLevel 2
15. In a pure monopoly, how many sellers control the market?
Answer: 1 sellers
A monopoly has exactly one seller controlling the product.
Match the pairsLevel 2
16. Match each market to its number of sellers.
Answer: Monopoly = One seller; Strong competition = Many sellers; Two big sellers only = A couple of sellers
A monopoly has one seller, while competition has many sellers.
Multiple choiceLevel 2
17. Because a monopoly has no competitors, it can often ____.
- charge a higher price than sellers who competecorrect
- be forced to give everything away for free
- never decide its own prices
- have thousands of rival shops nearby
With no rivals, a monopoly seller has more power to set a higher price.
Sort into groupsLevel 4
18. Sort each source of monopoly as a Legal barrier or a Cost or resource barrier.
Answer: A patent granted by the government = Legal barrier; An exclusive license to operate = Legal barrier; Owning the only source of a rare mineral = Cost or resource barrier; Huge economies of scale in one network = Cost or resource barrier
Some barriers to entry come from laws like patents and licenses, while others come from controlling resources or having big cost advantages.

Price Controls

Choose all that applyLevel 2
19. Which of these are examples of price controls? (Choose all that apply.)
- A maximum legal price on breadcorrect
- A minimum legal wage for workerscorrect
- A shop choosing its own sale price with no rule
- A cap on how high rent can gocorrect
Maximum prices, minimum wages, and rent caps are all price controls set by rules.
Fill the blankLevel 2
20. A legal maximum price that a seller is not allowed to go above is called a price ____.
- ceilingcorrect
- floor
- tag
- war
A price ceiling is a cap, the highest price allowed.
Multiple choiceLevel 2
21. A price control is a rule, usually set by a government, that ____.
- limits how high or how low a price is allowed to becorrect
- decides what color a product must be
- bans people from ever buying anything
- forces every shop to close
Price controls are legal limits on how high or low a price can go.
Odd one outLevel 2
22. Which of these is NOT a price control?
- A shop freely picking its own price with no legal limitcorrect
- A legal maximum price on fuel
- A legal minimum wage
- A cap on ticket prices set by law
A price control is a legal limit, so a shop freely choosing any price is not one.
Match the pairsLevel 3
23. Match each price control to its usual effect when it is binding.
Answer: Price ceiling below market price = Shortage; Price floor above market price = Surplus; No price control = Price tends toward its balance point
Binding ceilings cause shortages and binding floors cause surpluses.
Put in orderLevel 3
24. Put these in order to show how a binding price ceiling can lead to a shortage.
Answer: Government sets a price below the market price -> Buyers want more at the low price -> Sellers offer less at the low price -> A shortage appears
A low legal price raises demand and lowers supply, which produces a shortage.

What a Market Is

Fill the blankLevel 1
25. A market brings together buyers and ____.
- sellerscorrect
- teachers
- rivers
- clouds
A market needs both buyers and sellers so trading can happen.
Multiple choiceLevel 1
26. What is a market in economics?
- A place or setup where buyers and sellers come together to tradecorrect
- A building where only farmers are allowed to work
- A safe where a bank keeps gold
- A machine that prints money
A market is wherever buyers and sellers meet to exchange goods and services.
True or falseLevel 1
27. A market must always be a physical place you can walk into.
Answer: False
Markets can be online too, like a shopping app, so they do not have to be a physical place.
Type the answerLevel 1
28. The people who pay money to get goods in a market are called ____.
Answer: buyers
Buyers are the people who want to purchase goods or services.
Odd one outLevel 2
29. Which one does NOT belong at a market?
- A person only napping and not tradingcorrect
- A seller offering fresh apples
- A buyer paying with money
- A price written on a tag
A market needs buyers, sellers, and prices, so someone just napping is not part of the trading.
Choose all that applyLevel 3
30. Which of these are real markets, even without a single building? (Choose all that apply.)
- The housing marketcorrect
- The online app marketcorrect
- The job (labor) marketcorrect
- A rainbow after the rain
Housing, apps, and jobs are all markets because buyers and sellers trade in them.

Where these questions come from. Each unit starts as a plan of the concepts it should cover and the difficulty it should span. Questions are written against that plan with AI assistance, then checked by a validator that rejects anything without a single defensible answer, an explanation, or plausible wrong options. How we write questions sets out the whole process, and corrections are fixed in the bank and reach the site and the app the same day.

How you practise

This unit mixes 10 different question formats, so you are recalling and applying rather than recognising the same layout every time.

Choose all that apply
Fill the blank
Guess the number
Match the pairs
Multiple choice
Odd one out
Put in order
Sort into groups
True or false
Type the answer

Practise Markets, Prices and Competition

119 questions across 23 steps. Start with step one and crawl at your own pace.

Play this unit

Read about Markets, Prices and Competition

Explainers from our blog on what this unit covers. Each one ends with real questions from the bank.

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