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Economics, Chapter 7 Test

STUDY
PLAY
Do producers have any control on price?
No!
Perfect competition -Many well-informed buyers/sellers, is easy to enter/exit the market, and all selling identical products (ex: bus tickets, water, and agriculture)
Perfect Competition
Product that is considered the same, reggardless of who makes it
commodity
any factor that makes it difficult for new firms to enter into the market
barrier to entry
expenses that a new business must pay before teh 1st product reaches a customer (internet makes this easier)
start-up costs
Monopoly = ___ seller, ____ product
1, 1
Why do natural monopolies exist?
its more efficient to only have one seller of a product
What are two examples of Natural monopolies?
Utility companies (electric, phone, water, gas, etc.)
What is the advantage of natural monopolies?
Not wasting resources, this is more efficient
Gov. role in natural monopolies?
Regulates/controls the company
What is the type of government monopolies that is set up by patents?
technological patent
Government issued right to be the only producer of that product?
Patent
Why do gov. grants patented monopolies?
They want yout o profit from research/development
Examples of an industrial monopoly (in gov. monopolies)
Professional sports leagues
2 examples of gov. monopolies by license:
radio/tv stations
To make your product unlike all of the others -
product differentiation
In a market with only one seller, that seller has a _______
monopoly
Characteristics that cause a producer's average cost to dropa s production rises are ________
economies of scale
A contract issued by a local authority that gives a single firm the right to sell its goods within an exclusive market is a _______
franchise
A monopoly offering targeted discounts is practicing ________
price discrimination
When you charge different groups of people different amounts for the same products =
price discrimination
4 Reasons for Monopolistic Competition Market Structures:
1) Many firms in the market 2) no real strong barriers to entry 3) slight control of price 4) differentiated/similar products
ESSAY QUESTION: Why businesses do "nonprice" and how? 4 reasons:
1) Different physical characteristics (size, color, shape of the product, etc) 2) location (gas, pharmacy, fast food, etc) 3) service (how you take care of the customer/product) 4) advertising image/status (nike, coke, designer purse, etc)
the Curbs on high profits:
1) competition 2) substitute goods
Consumer advantages:
1) wide variety of products at reasonable prices
2-4 businesses that are producing 70-80% of the market =
oligopoly
Conditions encouraging formation of oligopoly:
1) start-up costs 2) economies of scale 3) license/certain level of education
Practices that concern government:
1) price war (cut prices below cost of production) 2) trust (illegal group of companies that discourages companies) 3) cartel -group of businesses that form an oligopoly (drug, oil, etc)
A _____ is most successful when each members agrees and works together to control output
cartel
What is deregulation? And name some industries.
Deregulation - removal of some government rules/regulations (airlines, trucking, and bank industry)
What is a merger?
When 2 or more buisnesses become one
Antitrust powers:
Sherman Anti-Trust Act gives government power to stop cartels/monopolies