Economics Chapter 7 Test Study Guide Test Questions – Flashcards
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laissez-faire
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the philosophy that government should not interfere with commerce or trade
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industry
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refers to the supply side of the market, or all producers collectively
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market structure
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the nature and degree of competition among firms operating in the same industry
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perfect competition
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is characterized by a large number of well-informed independent buyers and sellers who exchange identical products
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imperfect competition
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the name given to a market structure that lacks one or more of the conditions of perfect competition
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monopolistic competition
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the market structure that has all the conditions of perfect competition except for identical products
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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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non-price competition
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the use of advertising, giveaways, or other promotional campaigns to convince buyers that the product is somehow better than another brand
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oligopoly
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a market structure in which a few very large sellers dominate the industry
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collusion
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a formal agreement to set prices or to otherwise behave in a cooperative manner
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price-fixing
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agreeing to charge the same or similar prices for a product
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monopoly
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a market structure with only one seller of a particular product
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natural monopoly
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a market situation where the costs of production are minimized by having a single firm produce the product
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economies of scale
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a situation in which the average cost of production falls as the firm gets larger
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franchise
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the exclusive right to do business in a certain area without competition
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geographic monopoly
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a monopoly based on the absence of other sellers in a certain geographic area
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technological monopoly
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a monopoly that is based on ownership or control of a manufacturing method, process, or other scientific advance
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patent
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an exclusive right to manufacture, use, or sell any new and useful invention for a specific period; covered for 20 years
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copyright
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the exclusive right of authors or artists to publish, sell, or reproduce their work for their lifetime plus 70 years
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government monopoly
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a monopoly the government owns and operates
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externality
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unintended side effect that either benefits or harms a third party not involved in the activity that caused it
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negative externality
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the harm, cost, or inconvenience suffered by a third party because of actions by others
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positive externality
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a benefit received by someone who had nothing to do with the activity that generated the benefit
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public goods
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products that are collectively consumed by everyone, and whose use by one individual does not diminish the satisfaction or value available to others
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trusts
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legally formed combinations of corporations or companies
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price discrimination
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the practice of charging customers different prices for the same product
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cease and desist order
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an FTC ruling requiring a company to stop an unfair business practice, such as price-fixing, that reduces or limits competition among firms
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public disclosure
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the requirement that businesses reveal information to the public
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5 market failures
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inadequate competition, inadequate information, resource immobility, external economies, public goods
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Clayton Antitrust Act
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passed by Congress in 1914 to give the government greater power over monopolies
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Sherman Antitrust Act
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to protect trade and commerce against unlawful restraint and monopoly
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internalizing an externality
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the act of making a change in a company's private costs or benefits in order to make them equal to the company's social costs or benefits
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characteristics of perfect competition
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-many sellers -deal in identical products -buyers and sellers act independently -reasonably well-informed about products and prices -no barriers to entry -no brands -no control over price
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characteristics of monopolistic competition
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-large number of sellers -deal in slightly differentiated products -reasonably well-informed about products and prices -few barriers to entry -brand names -some control over price -non-price competition
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characteristics of oligopoly
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-few very large sellers dominate the industry -deal in differentiated products -ability to change output -advertising -significant barriers to entry -collusion -reasonably well-informed about products and prices
