Competition and Market Structure Flashcards

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Questions and Answers

What is market structure?

A method of pricing products.

A theory about consumer preferences.

A classification that describes the nature and degree of competition among firms in the same industry. (correct)

A type of market failure.

What is pure competition?

Pure competition is a theoretical market structure that requires three major conditions: very large numbers of buyers and sellers, identical products, and freedom of entry and exit.

Define industry.

An industry is a group of firms producing similar or identical products.

What characterizes perfect competition?

Perfect competition is characterized by a large number of well-informed independent buyers and sellers who exchange identical products and have freedom of entry and exit. Signup and view all the answers

What is nonprice competition?

Nonprice competition is competition based on a product's appearance, quality, or design, rather than its price. Signup and view all the answers

Describe oligopoly.

Oligopoly is a market structure in which a few large sellers dominate the market and have the ability to affect prices in the industry. Signup and view all the answers

What is collusion?

Collusion is an illegal agreement among producers to fix prices, limit output, divide markets, or agree to reduce competition. Signup and view all the answers

Price-fixing is a legal practice.

False Signup and view all the answers

What is a monopoly?

A monopoly is a market structure characterized by a single producer. Signup and view all the answers

What does laissez-faire mean?

Laissez-faire is a philosophy that government should not interfere with business activity. Signup and view all the answers

Define natural monopoly.

A natural monopoly occurs when average costs of production are lowest when all output is produced by a single firm. Signup and view all the answers

What is a geographic monopoly?

A geographic monopoly is a market structure in which a firm has a monopoly because of its location or the small size of the market. Signup and view all the answers

What is a technological monopoly?

A technological monopoly is a market structure in which a firm has a monopoly because it owns or controls a manufacturing method, process, or other scientific advantage. Signup and view all the answers

What is a government monopoly?

A government monopoly is a monopoly created and/or owned by the government. Signup and view all the answers

What is monopolistic competition?

Monopolistic competition is a market structure having all conditions of pure competition except for identical products; a form of imperfect competition. Signup and view all the answers

Define product differentiation.

Product differentiation refers to real or imagined differences between competing products in the same industry. Signup and view all the answers

Study Notes

Market Structure Overview

Market structure classifies the nature and degree of competition among firms within an industry.
An industry consists of a group of firms that produce similar or identical products.

Pure Competition

Pure competition is a theoretical model requiring:
- A very large number of buyers and sellers.
- Identical products.
- Freedom of entry and exit from the market.

Perfect Competition

Perfect competition features:
- Many well-informed independent buyers and sellers.
- Exchange of identical products.
- Freedom of entry and exit, mirroring pure competition.

Nonprice Competition

Nonprice competition focuses on product attributes like appearance, quality, or design instead of price.

Oligopoly

Oligopoly is a market structure dominated by a few large sellers, giving them the power to influence industry prices.
It represents a form of imperfect competition.

Collusion and Price-Fixing

Collusion refers to illegal agreements among producers to manipulate prices, control output, or divide markets.
Price-fixing is a specific type of collusion where firms agree to charge uniform prices for products.

Monopoly

Monopoly exists when a single producer dominates the market, representing a form of imperfect competition.

Laissez-Faire Philosophy

Laissez-faire advocates minimal government intervention in business activities.

Types of Monopolies

Natural monopoly occurs when a single firm can produce at lower average costs for the entire market.
Geographic monopoly arises when a firm holds monopoly power due to its specific location or market size.
Technological monopoly is based on proprietary manufacturing methods or scientific advancements under the firm's control.
Government monopoly is established and/or owned by governmental entities.

Monopolistic Competition

Monopolistic competition retains all characteristics of pure competition, except for product differentiation, indicating that products are not identical.

Product Differentiation

Product differentiation highlights real or perceived differences between competing products within the same industry, influencing consumer choice.

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Description

Test your knowledge on different market structures and competition with these flashcards. Each card provides definitions and insights into concepts like pure competition and industry classification. Perfect for students of economics or business studies.