Chapter 7 Economics Test Test Questions

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Laissez-faire
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philosophy that gov. should not interfere with business activities
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Natural monopoly
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market structure where average cost of production are lowest when a single firm exists
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Trust
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illegal combination of corporations or companies organized to hinder competition
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Perfect competition
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market structure with many well- informed and independent buyers and sellers who exchange identical products
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Economies of scale
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situation in which the average cost of production falls, as a firm gets larger
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Product differentiation
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real or imagined differences between competing products in the same industry
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Externality
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economic side effect that affects an uninvolved third party
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Oligopoly
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market structure in which a few larger sellers dominate the industry
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Negative externality
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harmful side effect that affects an uninvolved third party
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Price-fixing
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agreement, usually illegal, by firms to charge the same price for a product

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