Economics Chapter 7 Market Structures
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Questions and Answers

What is laissez-faire?

  • A market structure with a single seller
  • The condition of perfect competition
  • Philosophy that government should not interfere with business activities (correct)
  • A strategy for monopolistic competition

    • What defines market structure?

    Nature and degree of competition among firms in the same industry.

    What is perfect competition?

    Market structure with many well-informed and independent buyers and sellers who exchange identical products.

    What is imperfect competition?

    <p>Market structure that does not meet all conditions of perfect competition.</p> Signup and view all the answers

    What is monopolistic competition?

    <p>Market structure that meets all conditions of perfect competition except identical products.</p> Signup and view all the answers

    What is product differentiation?

    <p>Real or imagined differences between competing products in the same industry.</p> Signup and view all the answers

    What is nonprice competition?

    <p>Sales strategy focusing on a product's appearance, quality, or design rather than its price.</p> Signup and view all the answers

    What is an oligopoly?

    <p>Market structure in which a few large sellers dominate the industry.</p> Signup and view all the answers

    What is collusion?

    <p>Agreement, usually illegal, among producers to fix prices, limit output, or divide markets.</p> Signup and view all the answers

    What is price-fixing?

    <p>Agreement, usually illegal, by firms to charge the same price for a product.</p> Signup and view all the answers

    What is a monopoly?

    <p>Market structure with a single seller of a particular product.</p> Signup and view all the answers

    What is a natural monopoly?

    <p>Market structure where average costs of production are lowest when a single firm exists.</p> Signup and view all the answers

    What are economies of scale?

    <p>Situation in which the average cost of production falls as a firm gets larger.</p> Signup and view all the answers

    What is a geographic monopoly?

    <p>Market structure in which one firm has a monopoly in a geographic area.</p> Signup and view all the answers

    What is a technological monopoly?

    <p>Monopoly based on a firm's ownership or control of a production method, process or other scientific advance.</p> Signup and view all the answers

    What is a government monopoly?

    <p>A monopoly owned and operated by the government.</p> Signup and view all the answers

    What is market failure?

    <p>Condition that causes a competitive market to fail.</p> Signup and view all the answers

    What are public goods?

    <p>Goods or services whose benefits are available to everyone and are paid for collectively.</p> Signup and view all the answers

    What is an externality?

    <p>Economic side effect that affects an uninvolved third party.</p> Signup and view all the answers

    What is a negative externality?

    <p>Harmful side effect that affects an uninvolved third party.</p> Signup and view all the answers

    What is a positive externality?

    <p>Beneficial side effect that affects an uninvolved third party.</p> Signup and view all the answers

    What is a trust?

    <p>Illegal combination of corporations or companies organized to hinder competition.</p> Signup and view all the answers

    What is price discrimination?

    <p>Practice of selling the same product at different prices to different buyers.</p> Signup and view all the answers

    What is a cease and desist order?

    <p>Ruling requiring a company to stop an unfair business practice that reduces or limits competition.</p> Signup and view all the answers

    What is public disclosure?

    <p>Requirement that a business reveal information about its products or its operation to the public.</p> Signup and view all the answers

    Study Notes

    Market Structures Overview

    • Laissez-faire advocates minimal government interference in business operations.
    • Market structure defines the competitive landscape among firms within an industry.

    Types of Market Structures

    • Perfect competition involves numerous buyers and sellers trading identical products with full information.
    • Imperfect competition fails to meet the criteria of perfect competition.
    • Monopolistic competition resembles perfect competition but features differentiated products.

    Key Concepts in Competition

    • Product differentiation creates perceived or actual differences among similar products.
    • Nonprice competition emphasizes attributes like quality or design rather than pricing strategies.

    Oligopoly and Monopolies

    • Oligopoly consists of a few dominant sellers controlling the market.
    • Collusion is an illegal practice where producers conspire to manipulate prices or market shares.
    • Price-fixing refers to firms agreeing to maintain the same product price unlawfully.
    • Monopoly is characterized by a single seller of a unique product, exerting significant market control.

    Types of Monopolies

    • Natural monopoly occurs when production costs are minimized under a single supplier.
    • Geographic monopoly exists when a firm holds exclusive market power in a specific area.
    • Technological monopoly is based on proprietary processes or advancements owned by a firm.
    • Government monopoly is a monopoly owned by state authorities.

    Economic Concepts

    • Economies of scale reduce average production costs as a firm increases its size and output.
    • Market failure happens when competitive markets cannot function effectively.
    • Public goods are services available to all, funded collectively, benefiting everyone.

    Externalities

    • Externality refers to secondary effects impacting third parties uninvolved in a transaction.
    • Negative externality results in adverse effects on uninvolved parties, such as pollution.
    • Positive externality yields benefits to third parties, like education enhancing community skills.

    Regulatory Concepts

    • Trust is an illegal alliance of businesses designed to restrict competition.
    • Price discrimination is the strategy of selling identical goods at varying prices based on buyer segmentation.
    • Cease and desist order mandates companies to halt unfair practices harming competition.
    • Public disclosure laws require businesses to transparently share information regarding their operations and products.

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    Description

    Test your understanding of key concepts from Chapter 7 on market structures. This quiz covers essential terms like laissez-faire, perfect competition, and more. Perfect for students looking to reinforce their knowledge of economic theories related to market competition.

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