Questions and Answers
What is perfect competition?
What is a commodity?
A product that is the same no matter who produces or sells it.
What does 'barrier to entry' mean?
Any factor that makes it difficult for a new firm to enter a market.
Imperfect competition meets all conditions of perfect competition.
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What are startup costs?
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What is a monopoly?
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What are economies of scale?
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What is a natural monopoly?
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What is a government monopoly?
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What is a patent?
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What is a franchise?
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What is price discrimination?
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What is market power?
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What is monopolistic competition?
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What does differentiation refer to?
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What is nonprice competition?
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What is an oligopoly?
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What is a price war?
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What is collusion?
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What is price fixing?
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What is a cartel?
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What is predatory pricing?
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What are antitrust laws?
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What is a trust?
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What is a merger?
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What is deregulation?
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Study Notes
Market Structures
- Perfect Competition: Characterized by many firms producing identical products; no single seller controls market supply or prices.
- Imperfect Competition: Exists when market conditions do not meet the criteria of perfect competition.
- Monopoly: A market structure where one seller dominates and controls the market completely.
- Monopolistic Competition: Involves many companies selling products that are similar but slightly different, allowing for some level of market power.
- Oligopoly: Dominated by a few large firms, leading to limited competition and collaborative behaviors among those firms.
Key Economic Concepts
- Commodity: Standardized product that is identical regardless of the producer (e.g., milk, petroleum).
- Barriers to Entry: Factors that hinder new firms from entering a market, impacting competition levels.
- Economies of Scale: Decrease in average production costs per unit as output increases, influencing competitive pricing.
Market Dynamics
- Natural Monopoly: Efficient market characterized by a single large firm providing all output, minimizing costs.
- Government Monopoly: A monopoly established by governmental authority, often to control essential services.
Intellectual Property and Business Rights
- Patent: Exclusive rights granted to inventors for a new product for a specific duration, protecting intellectual property.
- Franchise: Agreement allowing a single firm to market its products in a specified area under a unified brand.
Pricing Strategies and Competition
- Price Discrimination: Segmenting consumers based on their willingness to pay, maximizing revenue for firms.
- Market Power: A company’s ability to influence prices and output levels in the market.
- Nonprice Competition: Attracting customers through quality, service, or location rather than through lower prices.
Anti-competitive Practices
- Collusion: Illegal coordination among firms to manipulate market conditions (prices, supply).
- Price Fixing: Agreement among competitors to set a single price, undermining free market competition.
- Cartel: Formal collaboration among producers to control prices and production levels.
- Predatory Pricing: Temporarily pricing products below cost to eliminate competition from the market.
Regulatory Framework
- Antitrust Laws: Legislation aimed at fostering competition and preventing monopolistic practices in markets.
- Deregulation: The reduction or elimination of government rules controlling industry activities, encouraging competition.
Business Operations
- Startup Costs: Initial expenses faced by new businesses before they can begin operations.
- License: Official permission issued by the government allowing individuals or companies to operate a business.
Corporate Strategies
- Merger: The combination of two or more companies into a single entity, which can redistribute market power.
- Trust: An illegal arrangement among companies to stifle competition, akin to cartel behavior.
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Description
Explore key concepts from Chapter 7 of Economics, focusing on market structures like perfect competition, commodities, and barriers to entry. These flashcards will help reinforce your understanding of fundamental economic terms and their definitions, making them a valuable study aid for students. Test your knowledge and prepare for exams effectively!