Chapter 7: Market Structures Flashcards Preview

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Flashcards in Chapter 7: Market Structures Deck (32)
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0
Q

What are the four conditions for perfect competition?

A
  1. Many buyers and sellers participate in the market
  2. Sellers offer identical products
  3. Buyers and sellers are well informed about products
  4. Sellers are able to enter and exit the market freely
1
Q

perfect competition

A

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

2
Q

commodity

A

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

3
Q

barrier to entry

A

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

4
Q

imperfect competition

A

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

5
Q

start-up costs

A

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

6
Q

monopoly

A

a market dominated by a single seller

7
Q

economies of sale

A

factors that cause a producer’s average cost per unit to fall as output rises

8
Q

natural monopoly

A

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

9
Q

government monopoly

A

a monopoly created by the government

10
Q

patent

A

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

11
Q

franchise

A

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

12
Q

license

A

a government issued right to operate a business

13
Q

price discrimination

A

division of customers based on how much they will pay for a good

14
Q

market power

A

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

16
Q

What are some examples of targeted discounts/price discrimination?

A

discounted airline fares, manufacturers’ rebate offers, senior citizen or student discounts, children fly or stay free promotions

17
Q

What three conditions does a market need to meet for price discrimination to work?

A
  1. Some market power
  2. Distinct customer groups
  3. Difficult resale
18
Q

monopolistic competition

A

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

19
Q

What are the four conditions of monopolistic competition?

A
  1. Many firms
  2. Few artificial barriers to entry
  3. Slight control over price
  4. Differentiated products
20
Q

differentiation

A

making a product different from other similar products

21
Q

nonprice competition

A

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

22
Q

What are some examples of nonprice competition?

A
  1. Physical characteristics
  2. Location
  3. Service level
  4. Advertising, image, or status
23
Q

oligopoly

A

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

24
Q

price war

A

a series of competitive price cuts that lowers the market price below the cost of production

25
Q

collusion

A

an agreement among firms to charge one price for the same good

26
Q

price fixing

A

an agreement among firms to charge one price for the same good

27
Q

cartel

A

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

28
Q

predatory pricing

A

selling a product below cost to drive competitors out of the market

29
Q

antitrust laws

A

laws that encourage competition in the marketplace

30
Q

trust

A

like a cartel, an illegal grouping on companies that discourages competition

31
Q

merger

A

combination of two or more companies into a single firm

32
Q

deregulation

A

the removal of some government controls over a market