Market Structures and Competition Flashcards

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Questions and Answers

What does it mean to compete?

To work toward a goal while attempting to defeat rivals (correct)
To collaborate with others for a common goal
To avoid confrontation and participate passively
To work independently without any external influence

What is monopolistic competition?

A market structure in which many sellers produce the same item but each producer sets its own price and quality.

Define a monopoly.

A market that has a single supplier of a good or service.

What characterizes an oligopoly?

A market situation that exists when there are few businesses in a marketplace. Signup and view all the answers

What is pure competition?

A market with many sellers of products, free flow of information, and free entry to and exit from the marketplace. Signup and view all the answers

What is sovereignty in a market context?

A controlling influence on a market. Signup and view all the answers

When can monopolies form?

When there are no close substitutes for available goods and a barrier prevents producers from entering the market. Signup and view all the answers

What characterizes natural monopolies?

Occurs because cost production is too high for more producers and can include utilities, such as electricity providers. Signup and view all the answers

What are technological monopolies?

Occur when one producer controls a method of production, often due to a patent. Signup and view all the answers

What are government monopolies?

Created and run by the government, where the producer is the only one authorized in the specific market. Signup and view all the answers

What is consumer sovereignty like in a monopoly?

Little or no consumer sovereignty, with few choices and no price variation. Signup and view all the answers

How do oligopolies form?

When there are no close substitutes for available goods, barriers prevent producers from entering the market, and firms set prices. Signup and view all the answers

What is the nature of competition in an oligopoly?

Competition is limited, and it occurs through brand loyalty, advertising, and promotions. Signup and view all the answers

Can the car industry be considered an oligopoly?

Yes, due to significant barriers to entry and the impact of brand loyalty. Signup and view all the answers

What is consumer sovereignty in an oligopoly?

Limited, as consumer choices are often restricted and prices are usually higher. Signup and view all the answers

What defines monopolistic competition?

Producers set their own prices in a range similar to competitors and produce differentiated goods. Signup and view all the answers

What is consumer sovereignty like in monopolistic competition?

Less limited compared to other market structures, with more choices available. Signup and view all the answers

What characterizes pure competition?

Producers supply identical goods, with no control over price, which is determined by supply and demand. Signup and view all the answers

Where is consumer sovereignty greatest?

In a system of pure competition, where consumers can make choices based on price. Signup and view all the answers

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Study Notes

Market Structures Overview

Compete: Engaging in activities to achieve a goal while attempting to outperform rivals.

Types of Market Structures

Monopolistic Competition:
- Characterized by many sellers producing similar products.
- Each producer sets unique prices and quality without affecting the overall market.
Monopoly:
- A market controlled by a single supplier offering a good or service.
Oligopoly:
- A market structure with few businesses.
- Firms influence the market without complete control, often leading to limited competition.
Pure Competition:
- Features numerous sellers offering identical products.
- Free flow of information and unrestricted market entry and exit.

Consumer Sovereignty and Market Influence

Sovereignty: Refers to the controlling influence consumers have in a market.
In monopolistic competition, consumer choices are more varied due to lower entry barriers, requiring producers to offer desirable goods.

Formation of Monopolies

Monopolies can develop when:
- Close substitutes are unavailable for goods.
- Barriers hinder new producers from entering the market.
Natural Monopolies:
- Arise when a single producer efficiently meets total market demand due to high production costs.
- Common in utilities, e.g., electricity providers.
Technological Monopolies:
- Occur when one producer dominates a production method, often protected by patents.
Government Monopolies:
- Established by the government, where it is the sole provider in a market; other competitors are legally excluded.

Consumer Experience in Different Market Structures

In monopolies, limited consumer sovereignty leads to fewer choices and stable prices due to lack of competition.
Oligopolies restrict consumer sovereignty, offering limited options typically based on brand loyalty, resulting in higher prices and reduced overall output.

Characteristics of Competitive Structures

Monopolistic Competition:
- Producers set prices within a similar range to competitors, offering differentiated products with few barriers to entry.
Pure Competition:
- Producers provide identical goods, with no price control; market dynamics are driven by supply and demand.
- Consumers can impact the market through price-driven decisions, promoting lower prices due to competition.