Brainscape's Knowledge GenomeTM


Top Flashcards (Certified)
All Flashcards

micro econ > competitive and concentrated markets > Flashcards

competitive and concentrated markets Flashcards

(75 cards)

Start Studying
1
Q

market structure

A

the organisation of a market in terms of the number of firms in the market and the ways in which they behave

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

price taker

A

a firm which passively accepts the ruling market price set by market conditions out of its control

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

price maker

A

a firm possessing the power to set the price within the market

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

the 4 key questions on market structure

A

how many firms are there in the market?
are there any barriers to entry/exit?
how homogeneous are the products/services?
how much control is there over price?

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

the 6 conditions of perfect competition

A
  1. large number of buyers and sellers
  2. each buyer possesses perfect information about the market
  3. able to buy and sell as much as desired at the ruling market price
  4. single buyers are unable to influence market price
  5. only one good traded and each is homogeneous
  6. no barriers to entry and exit
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

imperfect competition

A

any market structure lying between the extremes of perfect competition and pure monopoly

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

competitive market

A

one in which firms strive to outdo their rivals but is not perfectly competitive

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

concentrated market

A

a market containing very few firms

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

pure monopolist

A

a single supplier that dominates the entire market - has 100% concentration

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

pure monopoly

A

when one firm produces all of the output

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

monopoly power

A

the power of a firm to act as a price maker rather than a price taker

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

profit maximisation

A

occurs when a firm’s total sales revenue is furthest above cost of production

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

what type of firm does profit maximisation mostly apply to? Why?

A

PLCs because they are answerable to their shareholders

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

where is the profit maximising point?

A

where marginal revenue = marginal cost

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

revenue maximisation

A

the goal of a firm to find the level of output or price that generates the highest possible revenue

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

when is the revenue maximising point?

A

when marginal revenue = 0

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

sales maximisation

A

occurs when sales revenue is maximised

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

where is the sales maximisation point?

A

when average costs = average revenue

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

market share maximisation

A

occurs when a firm maximises its % of the market in which it sells its product

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

what does market maximisation do?

A

increases a firm’s monopoly power

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

growth maximisation

A

occurs when the decision maker within a firm trys to make the firm grow as fast as possible, even though this may conflict with profit maximisation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

survival

A

the primary objective of firms in competitive markets, ensuring continued existence

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

satisficing

A

the idea of achieving the minimally acceptable result rather than the optimal solution

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

what do some firms do w satisficing?

A

generate the minimum level of profit their shareholders accept

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
who prefers satisficing?
monopoly firms
26
in perfect competition, what is price determined by?
the equilibrium between supply and demand
27
normal profit
when total revenue = total costs
28
what does normal profit include?
the cost of entrepreneurial effort
29
in perfect competition, what happens when new firms enter the market and sell at a lower price?
the incumbent firms making "supernormal" profits have to respond by reducing their prices too
30
what happens to supply if there are no barriers to entry and why?
supply will shift to the right as more firms enter the market and push price level down
31
entry barrier
makes it difficult or impossible for new firms to enter a market
32
exit barrier
makes it difficult or impossible for new firms to exit a market
33
consumer sovereignty
through exercising their spending power, consumers collectively determine what is produced in the market
34
where is consumer sovereignty found and where is it strongest?
found in highly competitive markets and strongest in perfect competition
35
producer sovereignty
producers in a market determine what is produced and what prices are charged
36
5 features of market with monopoly power
1. a single firm controls over 25% of the market 2. products are differentiated 3. firms can generate profit above the normal level in the long run 4. there are barriers to entry 5. firms are not price-takers
37
near pure monopoly
when one firm has a market share in excess of 90%
38
3 key characteristics of a pure monopoly
1. significant internal economies of scale 2. high regulatory barriers to entry 3. high trade barriers
39
4 ways an industry is stopped from being a pure monoply
1. can have monopoly status taken away 2. technological change creates new substitute products 3. competition authorities may find other ways to inject competition 4. most industries are contestable to a degree
40
2 key features of a firm having monopoly power
1. price setting power 2. ability to harness barriers to entry to maintain supernormal profits in the long run
41
2 meanings of natural monopoly
1. when a country or firm has complete control of a natural resource 2. when there is only room in a market for one firm benefitting from economies of scale to the full
42
geographical causes for monopoly
a pure natural economy can occur when, for climatic or geological reasons, a particular country or location is the only source of supply of a raw material
43
why do governments create monopoly?
in markets they believe to be too important to leave to competition
44
patent
a strategic or man-made barrier to market entry caused by government legislation protecting the right of a firm to be the sole producer of a patented good, unless the firm grants royalties for other firms to produce the good
45
natural barrier to entry
a barrier to market entry which is not man made
46
what do natural barriers to entry include?
economies of scale and indivisibilities
47
indivisibilities
prevent certain goods and services being produced below a certain size
48
artificial barrier to entry
a barrier to market entry which is man made
49
the larger the number of firms, ...
the less scope there is for exercising monopoly power
50
informative advertising
provides consumers and producers with useful information about goods or services
51
what does informative advertising do? why?
increases competition because it provides consumers with useful information about the market
52
persuasive advertising
attempts to persuade potential customers that a good or service possesses desirable characteristics that make it worth buying
53
how does persuasive advertising reduce competition?
customers become "captive customers" who are unwilling to buy a cheaper substitute as they see the product as being a "must have"
54
saturation advertising
through flooding the market with information and persuasion about a firm's product, this functions as a man-made barrier to market entry by making it difficult for smaller firms to compete
55
why can small firms not enter the market due to saturation advertising?
they cannot afford the minimum level of advertising and other forms of promotion
56
product differentiation
making a product different from other products through product design, the production method, or through its functionality
57
concentration ratio
the market share held by a number of leading firms
58
market share
one firm's % of the total market
59
oligopoly
a market dominated by a few firms
60
5 advs of monopolies
1. economies of scale 2. stable prices 3. research and development 4. long-term planning 5. potential for high profits
61
5 disadvs of monopolies
1. higher prices for consumers 2. reduced consumer choice 3. inefficiency 4. price discrimination 5. barriers to entry
62
resource missallocation
when resources are allocated in a way in which it does not maximise economic welfare
63
collusion
co-operation between firms
64
invention
creates new ideas for products or processes
65
innovation
converts the results of invention into marketable products or services
66
5 advs of oligopolies
1. economies of scale 2. innovation and product development 3. stable prices 4. non-price competition 5. high profits
67
5 disadvs of oligopolies
1. price rigidity 2. collusion 3. barriers to entry 4. reduced consumer choice 5. market inefficiency
68
5 advs of perfect competition
1. allocative efficiency 2. productive efficiency 3. consumer sovereignty 4. lower prices 5. no barrier to entry
69
5 disadvs of perfect competition
1. lack of innovation 2. no economies of scale 3. short-term focus 4. no product differentiation 5. limited profits for firms
70
price competition
reducing the price of a good or service to gain sales by making it more attractive to consumers
71
special offer pricing
temporarily discounted prices on some goods
72
limit pricing
reducing the price of a good to just ABOVE average cost to deter the entry of new firms into the market. prices are set at levels which are likely to make it unprofitable for potential entrants
73
what do established firms do w limit pricing?
sacrifice short-run profit maximisation in order to maximise long-run profits
74
predatory pricing
temporarily reducing the price of a good to BELOW average cost to drive smaller firms or new market entrants out of the market
75
what are both limit and predatory pricing?
barriers to entry

micro econ (3 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2025 Bold Learning Solutions. Terms and Conditions