Upgrade to remove ads
Only $35.99/year

Economics-Chapter 7 Market Structures

Terms in this set (46)

market structure
an economic model of competition among businesses in the same industry
perfect competition
The ideal model of a market economy
standardized product
a product that consumers see as identical regardless of producer
price taker
a business that accepts the market price determined by supply and demand
imperfect competition
occurs in markets that have few sellers or products that are not standardized
Characteristics of Perfect Competition
-numerous buyers and sellers
-standardized products
-freedom to enter/exit markets
-independent buyers and sellers
-well-informed buyers and sellers
numerous buyers and sellers
A large # of buyers and sellers ensures that no one controls prices
standardized product
All products are essentially the same
freedom to enter/exit the market
producers can enter or exit the market with no interference
well-informed buyers and sellers
both buyers and sellers know the market prices and other conditions
independent buyers and sellers
buyers and sellers do not band together to influence prices
monopoly
a market structure that occurs when there is only one seller of a product that has no close substitutes
-least competitive market structure
cartel
a group that acts together to set prices and limit output
price maker
a business that does not have to consider competitors when setting the prices of its products
-consumers either buy or choose not to
barrier of entry
something that hinders a business from entering a market
-large size, gov. regulations, special resources or technology
Characteristics of a monopoly
-only one seller
-a restricted, regulated market
-control of prices
only one seller
a single business is identified with the industry because it controls the supply of a product that has no real substitues
a restricted, regulated market
barriers keep other businesses out of market
control of prices
monopolies act as price makers because they sell products that have no close substitutes and they face no competition
natural monopoly
occurs when the costs of production are lowest with only one producer
-public utilities (water company)
-single supplier is most efficient due to economies of scale
economies of scale
a situation in which the average cost of production falls as the firm gets larger
government monopoly
exists when the government either owns and runs the business or authorizes only one producer
-provides goods/services that cannot be provided by private firms or not attractive to them because of small profit opportunities (army)
technological monopoly
occurs when a firm controls a manufacturing method, invention, or type of technology
geographical monopoly
exists b/c there are no other producers/sellers withing a certain region (the New York Giants)
patent
legal registration that gives an inventor the exclusive property rights to that invention or process for a certain # of years
monopolistic competition
Occurs when many sellers offer similar, but not standardized, products
product differentiation
the effort to distinguish a product from similar products
non-price competiton
occurs when producers use factors other than low price to try and convince customers to buy their products (style, service, advertising)
characteristics of monopolistic competition
-many sellers, many buyers
-similar but differentiated products
-limited control of prices
-freedom to enter/exit the market
similar but differentiated product
their product is different that the competition (brand names, advertising)
oligopoly
a market structure in which only a few sellers offer similar or identical products
-few large firms have a large market share
market share
% of total sales in a market
start-up costs
the expenses that a new business faces when it enters a market
characteristics of an oligopoly
-few sellers, many buyers
-standardized or differentiated products--> sell both
-more control of prices--> fewer sellers= more $ control
-little freedom to enter/exit the market
regulation
A set of rules or laws designed to control business behavior (protect consumers)
antitrust legislation
laws that define monopolies and give government the power to control them
trust
a group of firms combined for the purpose of reducing competition in an industry
-to keep trusts from forming, the gov. regulates business mergers
merger
when two or more companies join to form a single firm
price fixing
occurs when businesses work together to set the prices for competing products
market allocation
occurs when competing businesses divide a market amongst themselves
predatory pricing
occurs when businesses set prices below costs for a time to drive competitors out of a market
cease and desist order
requires a firm to stop an unfair business practice
public disclosure
a policy that requires businesses to reveal product information
deregulation
reduces or removes government control of businesses
-positives: lower prices, increased competition
-negatives: fewer protections for consumers
Food and Drug Administration (FDA)
Protects consumers from unsafe food, drugs, or cosmetics, Requires truth in labeling of these rpoducts
Federal Trade Commission (FTC)
Enforces Anti-trust laws and monitors unfair business practices, including deceptive advertising
Sets with similar terms