Market Structure

Question 1

Price-Taking Firm

Answer 1

A firm whose actions have no effect on the market price of the good or service it sells

Question 2

Price Taking Consumer

Answer 2

Consumer whose actions have no effect on the market price of the good or service they buy

Question 3

Perfectly Competitive Market

Answer 3

Market in which all market participants are price takers

Question 4

Free Entry and Exit

Answer 4

Quality an industry has when new firms can easily enter into the industry and existing firms can easily leave the industry

Question 5

Monopolist

Answer 5

The only producer of a good that has no close substitutes.

Question 6

Monopoly

Answer 6

An industry controlled by a monopolist

Question 7

Barrier to Entry

Answer 7

something that prevents other firms from entering the industry

Question 8

Natural Monopoly

Answer 8

When economies of scale provide a large cost advantage to a single firm that produces all of an industry’s output

Question 9

Patent

Answer 9

Gives an inventor a temporary monopoly in the use or sale of an invention

Question 10

Copyright

Answer 10

Gives the creator of a literary or artistic work the sole right to profit from that work

Question 11

Oligopoly

Answer 11

An industry with only a small number of firms

Question 12

Oligopolist

Answer 12

A producer in an oligopoly

Question 13

Imperfect Competition

Answer 13

When no one firm has a monopoly but producers nonetheless realize that they can affect the market prices

Question 14

Concentration Ratios

Answer 14

Measure the percentage of industry sales accounted for the “X” largest firms, for example the four firm concentration ratio or the eight-firm concentration ratio

Question 15

Herfindahl-Hirschman Index

Answer 15

The square of each firm’s share of market sales summed over the industry. It gives a picture of the industry market structure

Question 16

Monopolistic Competition

Answer 16

Market structure in which there are many competing firms in an industry, each firm sells a differentiated product, and there is free entry into and exit from the industry in the long run

Question 17

Price Taking Firm’s Optimal Output Rule

Answer 17

A price taking firm’s profit is maximized by producing the quantity of output at which the market price is equal to the marginal cost of the last unit produced

Question 18

Shut down price

Answer 18

The minimum average variable cost- if a firm falls below this point they have to shut down

Question 19

Short Run Individual Supply Curve

Answer 19

Represents how an individual firm’s profit-maximizing level of output depends on the market price, taking fixed cost as given

Question 20

Industry Supply Curve

Answer 20

Shows the relationship between the price of a good and the total output of the industry as a whole

Question 21

Short Run Market Equilibrium

Answer 21

When the quantity supplied equals the quantity demanded, taking the number of producers as given

Question 22

Long Run Market Equilibrium

Answer 22

When the quantity supplied equals the quantity demanded, given that sufficient time has elapsed for entry into and exit from the industry to occur

Question 23

Long Run Industry Supply Curve

Answer 23

Shows how the quantity supplied responds to the price once producers have had time to enter or exit the industry