ch. 7 Flashcards Preview

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Flashcards in ch. 7 Deck (23):
1

Perfect Competition

a market structure in which a large number of firms all produce the same product.

2

Commodity

a product that is the same no matter who produces it such as petroleum, notebook, paper or milk

3

Barrier to Entry

any factor that makes it difficult for a new firm to enter a market

4

Imperfect Competition

a market structure that does not meet the conditions of perfect competition

5

Start-Up Costs

The expenses a firm must pay before it can begin to produce and sell goods

6

Monopoly

a market dominated by a single seller

7

Economies of scale

factors that cause a producers average cost per unit to fall as out put rises

8

natural monopoly

a market that runs most effectively when one large firm supplies all of the output

9

government monopoly

a monopoly created by the government

10

patent

a license that gives the inventor of a new product the exclusive right to sell it for a certain period of time

11

Franchise

the right to sell as good or service within an exclusive market

12

License

a government issued right to operate a business

13

market power

the ability of a company to change prices and output like a monopolist

14

monopolistic competition

a market structure in which many companies sell products that are similar but not identical

15

differentiation

making a product different from other similar products

16

nonprice competition

a way to attract customers through style, service, or location, but not a lower price

17

oligopoly

a market structure in which a few large firms dominate a market

18

Cartel

a formal organization of producers that agree to coordinate prices and production

19

Trust

like a cartel an illegal grouping of companies that discourages competition

20

4 characteristics of monopolistic competition

1. many sellers and buyers
2. similar but differentiated product
3. limited control of prices
4. freedom to enter or exit market

21

4 characteristics of oligopoly

1. few sellers and many buyers
2. standardized or differentiated products
3. more control of prices
4. little freedom to enter/exit market

22

Product that is considered the same, reggardless of who makes it

commodity

23

4 Reasons for Monopolistic Competition Market Structures:

1) Many firms in the market 2) no real strong barriers to entry 3) slight control of price 4) differentiated/similar products