Economics Chapter 7: Market Structure Combo – Flashcards
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Competition
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Involves all the actions that sellers acting independently take to get buyers to purchase their product.
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Market Structure
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A economic model that that helps economists to examine competition among businesses in the same industry.
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Perfect Competition
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The ideal model of a market economy.
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5 Characteristics of Perfect Competition
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1. Numerous buyers and sellers 2. Standardized product 3. Freedom to enter and exit markets 4. Independent buyers and sellers 5. Well informed buyers and sellers
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Standardized Product
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A product that consumers consider identical in all essential features to other products in the same market.
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Price Taker
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A business that cannot set the price for its products but, instead accepts the market price set by the interaction of supply and demand.
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Imperfect Competition
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Market structures that lack one of the conditions needed for perfect competition.
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Monopoly
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A market structure in which only one seller sells a product for which there are no close substitutes.
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Cartel
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a formal organization of sellers or producers that agree to act together to set prices and limit output
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Price Maker
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a business that does not have to consider competitors when setting the prices of its products
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Barrier to Entry
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something that makes it hard for new businesses to enter market such as government regulations, large start up costs, special resources or technology.
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OPEC
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(Organization of the Petroleum Exporting Countries) is a cartel that aims to manage the supply of oil in an effort to set the price of oil on the world market, in order to avoid fluctuations that might affect the economies of both producing and purchasing countries
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De Beers
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Company that held a virtual monopoly on the diamond market for most of the 20th Century
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3 Characteristics of Monopoly
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1. Only one seller 2. A restricted, regulated market 3. Control of Prices
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Natural Monopoly
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A type of monopoly that occurs when the costs of production are lowest with only one producer. Example- A Water and Power Company
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Government Monopoly
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A type of monopoly that exists when the government either owns and runs the business or authorizes only one producer. Example- The U.S. Postal Service
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Technological Monopoly
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A type of monopoly that occurs when a firm controls a manufacturing method, invention, or type of technology. Example- Polaroid Company
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Geographic Monopoly
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A type of monopoly that exists when there are n other producers in a certain region. Example- Professional Sports Teams
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Economies of Scale
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a situation in which the average cost of production falls as the producer grows larger
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Patent
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a legal registration of an invention that gives the inventor the exclusive property rights to that invention or process for a certain number of years
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Monopolistic Competition
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A market structure where many sellers offer similar, but not standardized products.
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Production Differentiation
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The effort to distinguish a product from other similar products
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Nonprice Competition
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When producers use factors other than lower price to try to convince customers to buy their product. Examples include style, service, advertising, and giveaways.
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4 Characteristics of Monopolistic Competition
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1. Many Sellers and Many Buyers 2. Similar but Differentiated Products 3. Limited Control of Prices 4. Freedom to Enter or Exit the Market
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Focus Group
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a moderated discussion with small groups of consumers
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Oligopoly
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a market structure in which only a few sellers offer a similar product
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4 Characteristics of Oligopoly
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1. Few Sellers and Many Buyers 2. Standardized or Differentiated Products 3. More Control of Prices 4. Little Freedom to Enter or Exit the Market
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Market Share
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a company's percent of total sales in a market
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Start-Up Costs
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the expenses that a new business faces when it enters a market
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Joan Robinson
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British Economist who wrote "The Economics of Imperfect Competition" where she described Oligopoly in 1933.
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Regulation
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set of rules or laws designed to control business behavior
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Antitrust Legislation
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laws that defines monopolies and gives government the power to control them
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Trust
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a group of firms combined in order to reduce competition in an industry
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Merger
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the joining of two firms to form a single firm
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Sherman Antitrust Acts
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Act passed in 1890 that gave government the power to control monopolies and to regulate business practices that might reduce competition
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Standard Oil Company
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Company owned by John D. Rockefeller that had a monopoly in the oil industry in the United States in the late 1800s
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Federal Trade Commission (FTC)
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Government agency established in 1914 that enforces antitrust laws and monitors unfair business practices, including deceptive advertising
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Food and Drug Administration (FDA)
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Government Agency established in 1906 that protects consumers from unsafe foods, drugs, or cosmetics; and requires truth in labeling of these products.
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Federal Communications Commissions (FCC)
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Government Agency established in 1934 that regulates the communications industry, including radio, television, cable, and telephone services.
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Securities and Exchange Commission (SEC)
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Government Agency established in 1934 that regulates the market for stocks and bonds to protect investors.
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Environmental Protection Agency (EPA)
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Government Agency established in 1970 that protects human health by enforcing environmental laws regarding pollution and hazardous materials.
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Consumer Product Safety Commission (CPSC)
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Government Agency established in 1972 that set safety standards for thousands of types of consumer products and issues recalls for unsafe products.
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Price Fixing
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Occurs when business agree to set prices for competing products.
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Market Allocation
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Occurs when competing businesses divide a market among them selves.
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Predatory Pricing
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Occurs when businesses set prices below cost for a time to drive competitors out of a market.
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Cease and Desist Order
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Requires a firm to stop unfair business practice.
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Public Disclosure
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Is a policy that requires businesses to reveal product information
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Deregulation
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Reduces or removes government control of business.
