(1) Chapter 4 - Competitive and Concentrated Markets Flashcards Preview

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Flashcards in (1) Chapter 4 - Competitive and Concentrated Markets Deck (27)
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1
Q

Define MARKET STRUCTURE

A

The organisation of a market in terms of the number of firms and how they behave

2
Q

Define a PRICE TAKER

A

A firm that passively takes the market selling price for their goods, as they do not have enough power to change it

3
Q

Define a PRICE MAKER

A

A firm possessing enough power to change/set the price of a good

4
Q

What are the 6 conditions needed for a PERFECT COMPETITION market?

A
  • Large number of buyers and sellers
  • Each buyer and seller possesses information about the market
  • Buyers and sellers are able to buy/sell as much as they want
  • A single buyer/seller cannot influence the change of price
  • All goods are homogenous
  • Barriers of entry
5
Q

Define a COMPETITVE MARKET

A

Where firms try to outdo each other

6
Q

Define a CONCENTRATED MARKET

A

A market containing very few firms, in the extreme only one firm

7
Q

Define PURE MONOPOLY

A

Where there is only one firm in the market

8
Q

Define MONOPOLY POWER

A

The power of a firm to be a price maker instead of being a price taker

9
Q

What is an ENTRY BARRIER?

A

What makes it hard/impossible for firms to enter a market

10
Q

What is an EXIT BARRIER?

A

What makes it hard/impossible for firms to leave a market

11
Q

What is CONSUMER SOVEREIGNTY?

A

Where consumers collectively determine what is produced in a market through their spending power

12
Q

What is PRODUCER SOVEREIGNTY?

A

Producers/Firms determine what is produced and what prices are charged

13
Q

What is NATURAL MONOPOLY?

2 meanings

A
  1. When a firm has complete control over a natural resource

2. One firm is benefiting from economies of scale to the full

14
Q

Define PATENT

A

A man-made barrier to market entry (by government) to protect a single firm to have pure monopoly

15
Q

What are the two main types of entry barriers?

A

Natural and artificial

16
Q

Define INFORMATIVE ADVERTISING

A

Providing consumers/producers with useful information about goods/services

17
Q

Define PERSUASIVE ADVERTISING

A

Attempts to persuade customers that a good/services is better than others

18
Q

Define SATURATION ADVERTISING

A

Flooding the market with advertisement which makes it hard for upcoming firms to enter the market

19
Q

Define PRODUCT DIFFERENTIATION

A

Making a product different from other products

20
Q

What is the CONCENTRATION RATIO?

A

The total market share of the number of leading firms

21
Q

Define OLIGOPOLY

A

A market dominated by a few firms

22
Q

What is RESOURCE MISALLOCATION?

A

When resources are not allocated in the best way to maximize economic welfare

23
Q

Define COLLUSION and why is it bad?

A

Co-operation between firms, this is bad because they can do things like fix prices to make it much higher than it should be and people are forced to buy it

24
Q

Define INVENTION

A

Creating new ideas for a new market

25
Q

Define INNOVATION

A

Improving/adapting inventions

26
Q

What is PRICE COMPETITION

A

Reducing the price of a good to attract more customers

27
Q

What are the two types of PRICE COMPETITION?

A
  • Limit pricing

- Predatory pricing