Markets

Question 1

Market

Answer 1

An institution where buyers and sellers of goods and services negotiate the price of a g/s

Question 2

Market Structure

Answer 2

The type of competition that exists in a particular market

Question 3

Monopoly Market

Answer 3

-Where a market or industry is dominated by a single producer of g+s for which there is no close substitute
-No competition, firm is “price maker”
-Differentiation is unimportant
-Difficult entry and exit

Question 4

Oligopoly Market

Answer 4

-When several large firms control the output of a product for which there is no close substitute
-Up to 8 firms
-Potential for collusion
-Sellers watch rivals when setting prices
-Differentiation is quite important
-Fairly difficult entry and exit

Question 5

Monopolistic competition

Answer 5

-Where a market has many buyers and sellers of goods and services for which there are close but not perfect substitutes
-Up to 40 sellers selling slightly different products
-Moderate ease of entry and exit
-Product differentiation is important
-Good knowledge of market conditions

Question 6

Pure or Perfect competition

Answer 6

A theoretical situation where many buyers and sellers compete to set prices for g+s for which there are many close substitutes
-Many buyers and sellers
-Firms are “price takers”
-Product is homogenous (no brand names)
-Ease of entry and exit
-Closest example is shares market

Question 7

Relative prices

Answer 7

The final price of a particular good or service compared to another

Question 8

Relative profits

Answer 8

The profits gained from producing one good in comparison to another. As firms are motivated by profit, they will allocate resources to where relative profits are greatest