Economics Chapter 7 Test Flashcards

Market Structures

• Market structure refers to the economic model of competition among businesses within the same industry.
• Perfect competition is characterized by numerous buyers and sellers, a standardized product, open market entry and exit, and well-informed participants.

Types of Competition

• Imperfect competition has few sellers and products that are not standardized.
• Monopoly exists when a single seller provides a product with no close substitutes, controlling prices in the market.
• Oligopoly features a few sellers that dominate the market while offering similar products.

Business Practices

• Cartels are groups that collaborate to set prices and limit production output.
• Price makers can set their own prices without needing to consider competitors, unlike price takers who accept market prices.
• Nonprice competition involves strategies other than price to attract customers, such as marketing and product quality.

Barriers to Entry

• Barriers to entry are obstacles that prevent new companies from entering a market, which can include high startup costs and regulatory hurdles.
• Economies of scale occur when production costs decrease as the size of the producer increases.

Forms of Monopoly

• Natural monopolies arise when one producer can supply the entire market more efficiently than multiple producers.
• Government monopolies occur when the government owns or exclusively authorizes a business.
• Technological monopolies happen when a company controls unique manufacturing methods or technology.
• Geographic monopolies exist when no other producers operate in a given area.

Market Regulation

• Regulation entails laws to control business practices and ensure fair competition.
• Antitrust legislation aims to define and regulate monopolies while preventing unfair competition.

Business Collusion

• Trusts are arrangements where companies combine efforts to minimize competition.
• Price fixing is the practice of agreeing to set prices for competing goods.
• Market allocation involves competitors dividing markets to eliminate competition.

Firm Mergers and Practices

• Mergers occur when two firms join to create a new entity, potentially affecting market competition.
• Predatory pricing is a strategy where prices are set below cost temporarily to eliminate competitors.

Enforcement Agencies

• The FDA ensures the safety and accuracy of food and drug labeling.
• The FTC enforces antitrust laws and monitors deceptive advertising practices.
• The SEC regulates the stock and bond markets to protect investors.
• The EPA enforces environmental laws to safeguard public health.
• The CPSC sets safety standards and coordinates product recalls for consumer goods.

Consumer Protection

• Public disclosure policies mandate businesses provide product information to consumers.
• Deregulation reduces government oversight, potentially affecting market dynamics.