ch. 7

Question 1

Perfect Competition

Answer 1

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

Question 2

Commodity

Answer 2

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

Question 3

Barrier to Entry

Answer 3

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

Question 4

Imperfect Competition

Answer 4

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

Question 5

Start-Up Costs

Answer 5

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

Question 6

Monopoly

Answer 6

a market dominated by a single seller

Question 7

Economies of scale

Answer 7

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

Question 8

natural monopoly

Answer 8

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

Question 9

government monopoly

Answer 9

a monopoly created by the government

Question 10

patent

Answer 10

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

Question 11

Franchise

Answer 11

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

Question 12

License

Answer 12

a government issued right to operate a business

Question 13

market power

Answer 13

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

Question 14

monopolistic competition

Answer 14

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

Question 15

differentiation

Answer 15

making a product different from other similar products

Question 16

nonprice competition

Answer 16

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

Question 17

oligopoly

Answer 17

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

Question 18

Cartel

Answer 18

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

Question 19

Trust

Answer 19

like a cartel an illegal grouping of companies that discourages competition

Question 20

4 characteristics of monopolistic competition

Answer 20

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

Question 21

4 characteristics of oligopoly

Answer 21

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

Question 22

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

Answer 22

commodity

Question 23

4 Reasons for Monopolistic Competition Market Structures:

Answer 23

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