Microeconomics Chapter 2: Perfect Markets
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Questions and Answers

What is the primary objective of a firm in a perfect market?

  • To influence market prices
  • To minimize losses
  • To maximize profit (correct)
  • To differentiate products

    • What is a characteristic of products in a perfectly competitive market?

  • Differentiation
  • Monopoly
  • Regulation
  • Homogeneity (correct)

    • What is the role of individual businesses in a perfectly competitive market?

  • Regulator
  • Monopoly
  • Price maker
  • Price taker (correct)

    • What is the impact of a single entity on market prices in a perfectly competitive market?

    <p>None</p> Signup and view all the answers

    What is the focus of businesses in a perfectly competitive market?

    <p>Revenue and cost metrics</p> Signup and view all the answers

    What is a characteristic of a perfectly competitive market?

    <p>Freedom of entry and exit</p> Signup and view all the answers

    What is the condition for a firm to produce an additional unit in a perfect market?

    <p>Marginal revenue equals marginal cost</p> Signup and view all the answers

    What is the result of firms in perfectly competitive markets adjusting their output in response to profits and losses?

    <p>Firms in the market make normal profits but no economic profits</p> Signup and view all the answers

    What is the primary goal of governments in designing competition policies?

    <p>To emulate the conditions of perfect competition</p> Signup and view all the answers

    What is a characteristic of a monopoly?

    <p>A single firm controls the entire supply of a product or service</p> Signup and view all the answers

    What is a characteristic of oligopolies?

    <p>Few firms dominate a market and engage in non-price competition</p> Signup and view all the answers

    In which market structure do firms face a downward-sloping demand curve?

    <p>Monopoly</p> Signup and view all the answers

    What is a characteristic of a monopoly?

    <p>A single firm dominates the entire market</p> Signup and view all the answers

    What is the result of allocative inefficiency in imperfect markets?

    <p>Lower output and higher prices</p> Signup and view all the answers

    What is a characteristic of an oligopoly?

    <p>A few firms dominate the market and are interdependent</p> Signup and view all the answers

    What can lead to strategic behaviors like price fixing and collusive practices in oligopolies?

    <p>The interdependence of firms</p> Signup and view all the answers

    What is a result of monopolistic competition?

    <p>A variety of products and innovations</p> Signup and view all the answers

    What is the purpose of government regulations and antitrust laws in imperfect markets?

    <p>To control monopolistic and oligopolistic powers</p> Signup and view all the answers

    What is the main reason for government intervention in imperfect markets?

    <p>To increase market efficiency and reduce inefficiencies</p> Signup and view all the answers

    What is an example of a negative externality?

    <p>Pollution</p> Signup and view all the answers

    What is the primary objective of cost-benefit analysis?

    <p>To evaluate the social costs and benefits of interventions</p> Signup and view all the answers

    What is a characteristic of public goods?

    <p>They are non-excludable and non-rivalrous</p> Signup and view all the answers

    What is a consequence of asymmetric information in markets?

    <p>Choices that do not maximize welfare</p> Signup and view all the answers

    What is protectionism?

    <p>Government actions and policies that restrict or restrain international trade</p> Signup and view all the answers

    What is an example of a market failure caused by imperfect competition?

    <p>Higher prices and reduced output</p> Signup and view all the answers

    What is an argument for protectionism?

    <p>Preservation of jobs against the threats posed by cheaper imported goods</p> Signup and view all the answers

    What is a consequence of imperfect distribution of income and wealth?

    <p>Skewed production towards high-end goods and services</p> Signup and view all the answers

    What is a benefit of free trade?

    <p>Access to a wider variety of goods and services, often at lower prices</p> Signup and view all the answers

    What is South Africa's trade policy approach?

    <p>A mix of protectionist and free trade measures</p> Signup and view all the answers

    What is the focus of economic growth and development strategies?

    <p>Fostering economic growth and development, particularly in South Africa</p> Signup and view all the answers

    What is the primary difference between economic growth and economic development?

    <p>Economic growth refers to an increase in real GDP, while economic development is a broader concept that includes economic growth and improvements in standards of living.</p> Signup and view all the answers

    What is the main goal of the demand-side approach to economic growth?

    <p>To stimulate economic activity through increased government expenditure and redistribution of income.</p> Signup and view all the answers

    Which of the following is a characteristic of the supply-side approach to economic growth?

    <p>Investing in infrastructure and technology to enhance production capacity.</p> Signup and view all the answers

    What is the main goal of the Reconstruction and Development Programme (RDP) in South Africa?

    <p>To meet basic needs, develop human resources, and build the economy.</p> Signup and view all the answers

    What is the main characteristic of the economic divide between the North and South?

    <p>A significant disparity in income levels, economic stability, and access to resources.</p> Signup and view all the answers

    What is the Human Development Index (HDI) used to measure?

    <p>The standard of living, including health, education, and income.</p> Signup and view all the answers

    Which of the following approaches is NOT a characteristic of South African economic policies?

    <p>Totalitarian approach, focusing on state-led economic growth.</p> Signup and view all the answers

    What is the primary focus of the Growth, Employment and Redistribution (GEAR) policy in South Africa?

    <p>Aiming at market-led growth, fiscal and monetary discipline, and enhancing investor confidence.</p> Signup and view all the answers

    What is the primary goal of the Accelerated and Shared Growth Initiative of South Africa (Asgi-SA)?

    <p>To target halving unemployment and poverty by improving average economic growth.</p> Signup and view all the answers

    What is a common evaluation criterion for South African economic policies?

    <p>Their effectiveness in reducing poverty and inequality.</p> Signup and view all the answers

    What is the primary goal of a firm in a perfectly competitive market?

    <p>To maximize profit</p> Signup and view all the answers

    What is a characteristic of an industry in a perfectly competitive market?

    <p>Multiple businesses producing identical products</p> Signup and view all the answers

    What is the significance of homogeneous products in a perfectly competitive market?

    <p>It prevents any single entity from influencing market prices</p> Signup and view all the answers

    What is the role of freedom of entry and exit in a perfectly competitive market?

    <p>It enables firms to respond to market changes</p> Signup and view all the answers

    What is the significance of perfect information in a perfectly competitive market?

    <p>It enables firms to make informed decisions</p> Signup and view all the answers

    What is a key concept in decision-making for businesses in perfectly competitive markets?

    <p>Marginal revenue</p> Signup and view all the answers

    What is a characteristic of imperfect markets?

    <p>Higher prices and lower output compared to perfect competition</p> Signup and view all the answers

    What is the primary goal of government regulations and antitrust laws in imperfect markets?

    <p>To enhance competitive outcomes and protect consumer interests</p> Signup and view all the answers

    What is a characteristic of monopolistic competition?

    <p>Many firms sell differentiated products</p> Signup and view all the answers

    What is the result of allocative inefficiency in imperfect markets?

    <p>Lower output and higher prices</p> Signup and view all the answers

    What is a characteristic of oligopolies?

    <p>The interdependence of firms</p> Signup and view all the answers

    What is the main reason for government intervention in imperfect markets?

    <p>To enhance competitive outcomes and protect consumer interests</p> Signup and view all the answers

    What is the condition for a firm to maximize profits in a market?

    <p>When marginal revenue equals marginal cost</p> Signup and view all the answers

    What is the primary goal of governments in designing competition policies?

    <p>To prevent monopolies and enhance economic efficiency</p> Signup and view all the answers

    What is the outcome of firms in perfectly competitive markets adjusting their output in response to profits and losses?

    <p>An equilibrium where firms make normal profits but no economic profits</p> Signup and view all the answers

    What is the effect of barriers to entry on a monopoly's profits?

    <p>Barriers to entry allow the monopolist to earn long-term economic profits</p> Signup and view all the answers

    What is the shape of the demand curve for an oligopolist?

    <p>A kinked demand curve</p> Signup and view all the answers

    What is the outcome of monopolistic competition in the long run?

    <p>Firms earn short-term economic profits but normalize in the long run</p> Signup and view all the answers

    What is the primary goal of government intervention in imperfect markets?

    <p>To increase market competition and reduce inefficiencies</p> Signup and view all the answers

    What is a characteristic of public goods?

    <p>They are non-excludable and non-rivalrous</p> Signup and view all the answers

    What is a consequence of imperfect distribution of income and wealth?

    <p>Skewed production towards high-end goods and services</p> Signup and view all the answers

    What is an example of a negative externality?

    <p>Pollution</p> Signup and view all the answers

    What is a result of allocative inefficiency in imperfect markets?

    <p>Resources are not allocated according to consumer preferences</p> Signup and view all the answers

    What is a characteristic of imperfect competition?

    <p>A single firm dominating the market</p> Signup and view all the answers

    What is the primary purpose of cost-benefit analysis in public policy?

    <p>To ensure resources are used efficiently and enhance social welfare</p> Signup and view all the answers

    What is the main argument for protectionism?

    <p>To protect local industries and jobs from foreign competition</p> Signup and view all the answers

    What is the benefit of free trade?

    <p>Increased access to goods and services at lower prices</p> Signup and view all the answers

    What is the focus of economic growth and development strategies?

    <p>To promote economic growth and development</p> Signup and view all the answers

    What is the primary difference between economic growth and economic development?

    <p>Economic growth focuses on economic expansion, while economic development focuses on human well-being</p> Signup and view all the answers

    What is South Africa's trade policy approach?

    <p>A mix of protectionism and free trade measures</p> Signup and view all the answers

    What is the primary difference between economic growth and economic development?

    <p>Economic growth is a narrower concept, focusing on real GDP, while economic development is a broader concept, including improvements in standards of living and income equity.</p> Signup and view all the answers

    Which of the following is a characteristic of the demand-side approach to economic growth?

    <p>Increasing government expenditure to stimulate economic activity.</p> Signup and view all the answers

    What is the primary goal of the Reconstruction and Development Programme (RDP) in South Africa?

    <p>Meeting basic needs, developing human resources, and building the economy.</p> Signup and view all the answers

    What is the Human Development Index (HDI) used to measure?

    <p>The standard of living, including health, education, and income.</p> Signup and view all the answers

    Which of the following approaches is NOT a characteristic of South African economic policies?

    <p>Monetarist approach.</p> Signup and view all the answers

    What is the primary focus of the Growth, Employment and Redistribution (GEAR) policy in South Africa?

    <p>Fostering market-led growth and enhancing investor confidence.</p> Signup and view all the answers

    What is the primary goal of the Accelerated and Shared Growth Initiative of South Africa (Asgi-SA)?

    <p>Halving unemployment and poverty by improving average economic growth.</p> Signup and view all the answers

    What is a common evaluation criterion for South African economic policies?

    <p>Their effectiveness in reducing poverty and inequality.</p> Signup and view all the answers

    What is the primary characteristic of the economic divide between the North and South?

    <p>A significant disparity in income levels and economic stability.</p> Signup and view all the answers

    Which of the following is a characteristic of the supply-side approach to economic growth?

    <p>Improving the quality of the labor force through education and training.</p> Signup and view all the answers

    What is a key characteristic of a perfectly competitive market?

    <p>Homogeneous products</p> Signup and view all the answers

    What is the primary objective of a firm in a perfectly competitive market in terms of output and pricing strategies?

    <p>To maximize profits</p> Signup and view all the answers

    What is the significance of freedom of entry and exit in a perfectly competitive market?

    <p>Enabling the free mobility of factors of production</p> Signup and view all the answers

    What is the role of individual businesses in a perfectly competitive market?

    <p>Being price takers</p> Signup and view all the answers

    What is a characteristic of industries in a perfectly competitive market?

    <p>Contributing to the industry's total output</p> Signup and view all the answers

    What is the significance of perfect information in a perfectly competitive market?

    <p>Ensuring no single entity can wield undue influence</p> Signup and view all the answers

    What is the outcome when marginal revenue (MR) equals marginal cost (MC) in a perfect market?

    <p>Firms achieve equilibrium and maximize profits.</p> Signup and view all the answers

    What is the primary objective of government policies in imperfect markets?

    <p>To emulate perfect competition and enhance economic efficiency.</p> Signup and view all the answers

    What is a characteristic of oligopolies?

    <p>Few firms dominate the market and engage in non-price competition.</p> Signup and view all the answers

    What is the outcome of monopolistic competition in the long run?

    <p>Firms earn normal profits due to free entry and exit.</p> Signup and view all the answers

    What is a characteristic of monopolies?

    <p>A single firm dominates the entire market.</p> Signup and view all the answers

    What is the role of perfect competition in economics?

    <p>It provides a benchmark for evaluating imperfect markets.</p> Signup and view all the answers

    What is a key feature of monopolies that allows them to influence market prices?

    <p>Barriers to entry</p> Signup and view all the answers

    In an oligopoly, what is a possible consequence of firms' interdependence?

    <p>Strategic behaviors like price fixing</p> Signup and view all the answers

    What is a characteristic of monopolistic competition that leads to non-price competition?

    <p>Product differentiation</p> Signup and view all the answers

    What is the result of imperfect markets, particularly monopolies and oligopolies, on economic welfare?

    <p>Welfare losses to society</p> Signup and view all the answers

    What is the primary goal of government regulations and antitrust laws in imperfect markets?

    <p>To enhance competitive outcomes and protect consumer interests</p> Signup and view all the answers

    What is a characteristic of imperfect markets that distinguishes them from perfect competition?

    <p>Market power and interdependence</p> Signup and view all the answers

    What is the main reason for government intervention in markets with imperfect competition?

    <p>To increase economic efficiency and reduce social welfare loss</p> Signup and view all the answers

    What is a characteristic of public goods?

    <p>Non-rivalrous and non-excludable</p> Signup and view all the answers

    What is a consequence of asymmetric information in markets?

    <p>Choices that do not maximize welfare</p> Signup and view all the answers

    What is a cause of market failure?

    <p>Externalities</p> Signup and view all the answers

    What is a consequence of imperfect distribution of income and wealth?

    <p>Prevention of market economies from being efficient</p> Signup and view all the answers

    What is the result of allocative inefficiency in imperfect markets?

    <p>Overproduction of some goods and underproduction of others</p> Signup and view all the answers

    What is the main purpose of cost-benefit analysis in public policy?

    <p>To evaluate the social costs and benefits of interventions aimed at correcting market failures</p> Signup and view all the answers

    What is a common argument in favor of protectionism?

    <p>To safeguard jobs against the threats posed by cheaper imported goods</p> Signup and view all the answers

    What is a key benefit of free trade?

    <p>It enhances consumer choice and fosters innovation in domestic industries</p> Signup and view all the answers

    What is the primary focus of economic growth and development strategies?

    <p>To address the challenges posed by the North/South divide and income inequality</p> Signup and view all the answers

    What is South Africa's trade policy approach?

    <p>A mix of protectionist and free trade measures, with a focus on promoting local industries and encouraging exports</p> Signup and view all the answers

    What is the primary difference between economic growth and economic development?

    <p>Economic growth focuses on increasing the quantity of goods and services produced, while economic development focuses on improving the quality of life</p> Signup and view all the answers

    What is the primary difference between economic growth and economic development?

    <p>Economic growth focuses on increase in GDP, while economic development focuses on improvement in standards of living and income equity</p> Signup and view all the answers

    What is the main goal of the demand-side approach to economic growth?

    <p>To stimulate economic activity through increased government expenditure and redistribution of income</p> Signup and view all the answers

    What is the primary focus of the Reconstruction and Development Programme (RDP) in South Africa?

    <p>To meet basic needs, develop human resources, and build the economy</p> Signup and view all the answers

    What is the main characteristic of the economic divide between the North and South?

    <p>A significant disparity in income levels and access to resources between developed and developing countries</p> Signup and view all the answers

    What is the primary goal of the Accelerated and Shared Growth Initiative of South Africa (Asgi-SA)?

    <p>To reduce unemployment and poverty by 50% in 10 years</p> Signup and view all the answers

    What is the Human Development Index (HDI) used to measure?

    <p>The standard of living, including measures of health, education, and income</p> Signup and view all the answers

    What is the primary focus of the supply-side approach to economic growth?

    <p>To improve productivity through education, training, and entrepreneurship</p> Signup and view all the answers

    What is a characteristic of the Growth, Employment and Redistribution (GEAR) policy in South Africa?

    <p>Aims at market-led growth, fiscal and monetary discipline, and enhancing investor confidence</p> Signup and view all the answers

    What is a common evaluation criterion for South African economic policies?

    <p>Their effectiveness in reducing poverty and inequality</p> Signup and view all the answers

    What is the primary goal of entrepreneurship in the context of economic growth and development?

    <p>To discover and exploit new business opportunities, integrating various production factors</p> Signup and view all the answers

    Study Notes

    Perfect Markets

    • A perfectly competitive market is characterized by:
      • Many buyers and sellers
      • Homogeneous products
      • Perfect information
      • Freedom of entry and exit
      • No government regulation
      • Complete mobility of factors of production
    • In a perfectly competitive market, individual businesses:
      • Are price takers
      • Have no influence over market prices
      • Focus on maximizing profits
    • Key revenue and cost concepts:
      • Total revenue (TR)
      • Average revenue (AR)
      • Marginal revenue (MR)
      • Total cost (TC)
      • Average cost (AC)
      • Marginal cost (MC)
    • Decision-making in a perfectly competitive market:
      • Firms maximize profit where marginal revenue equals marginal cost
      • If marginal revenue exceeds marginal cost, firms should increase production
      • If marginal revenue is less than marginal cost, firms should reduce production
    • Long-term dynamics in perfect markets:
      • Firms adjust output in response to profits and losses
      • Entry and exit of firms occur based on profitability
      • Equilibrium is reached when firms make normal profits but no economic profits

    Imperfect Markets

    • Imperfect markets deviate from the conditions of perfect competition
    • Types of imperfect markets:
      • Monopolies
      • Oligopolies
      • Monopolistic competition
    • Characteristics of imperfect markets:
      • Barriers to entry
      • Non-price competition
      • Interdependence of firms
      • Potential for economic profits
    • Dynamics of imperfect markets:
      • Revenue and cost curves
      • Profit maximization
      • Market efficiency
      • Regulatory impact
    • Implications of imperfect markets:
      • Allocative and productive inefficiencies
      • Welfare losses
      • Potential for government intervention

    Market Failures

    • Market failures occur when the price mechanism fails to allocate resources efficiently
    • Causes of market failures:
      • Externalities
      • Public goods
      • Merit and demerit goods
      • Imperfect competition
      • Asymmetric information
      • Immobile factors of production
      • Imperfect distribution of income and wealth
    • Consequences of market failures:
      • Inefficiencies
      • State intervention
      • Economic inequities
      • Externalities
    • Cost-benefit analysis:
      • Evaluates the social costs and benefits of interventions
      • Helps determine whether benefits exceed costs

    Economic Pursuits

    • Protectionism:
      • Definition: Government actions that restrict or restrain international trade
      • Common tools: Tariffs, quotas, and subsidies
      • Arguments: Infant industry, preservation of jobs, national security, prevention of dumping, and economic diversification
    • Free Trade:
      • Definition: Elimination of discrimination against imports and exports
      • Benefits: Specialization, economies of scale, enhanced consumer choice, innovation, and improved international relations
      • Arguments: Access to goods and services, economic efficiency, and economic growth
    • Evaluating South Africa's trade policies:
      • Export promotion
      • Import substitution
      • Major trade protocols and relationships

    Growth and Development

    • Economic Growth vs. Economic Development:
      • Economic growth: Increase in a country's real GDP or real GDP per capita
      • Economic development: Broader concept that includes economic growth, improvements in standards of living, income equity, and general well-being
    • Demand-side approach to economic growth:
      • Increased government expenditure
      • Redistribution of income
      • Import substitution
      • Export promotion
    • Supply-side approach to economic growth:
      • Improving the quality of the labor force
      • Managing and using natural resources
      • Accumulating capital goods
      • Advancements in technology
      • Entrepreneurship
    • Approaches used in South Africa:
      • Reconstruction and Development Programme (RDP)
      • Growth, Employment and Redistribution (GEAR)
      • Accelerated and Shared Growth Initiative of South Africa (Asgi-SA)
      • New Growth Path (NGP)
    • The North/South divide:
      • Economic divide between developed and developing countries
      • Disparities in income levels, economic stability, and access to resources

    Perfect Markets

    • A perfectly competitive market is characterized by:
      • Many buyers and sellers
      • Homogeneous products
      • Perfect information
      • Freedom of entry and exit
      • No government regulation
      • Complete mobility of factors of production
    • In a perfectly competitive market, individual businesses:
      • Are price takers
      • Have no influence over market prices
      • Focus on maximizing profits
    • Key revenue and cost concepts:
      • Total revenue (TR)
      • Average revenue (AR)
      • Marginal revenue (MR)
      • Total cost (TC)
      • Average cost (AC)
      • Marginal cost (MC)
    • Decision-making in a perfectly competitive market:
      • Firms maximize profit where marginal revenue equals marginal cost
      • If marginal revenue exceeds marginal cost, firms should increase production
      • If marginal revenue is less than marginal cost, firms should reduce production
    • Long-term dynamics in perfect markets:
      • Firms adjust output in response to profits and losses
      • Entry and exit of firms occur based on profitability
      • Equilibrium is reached when firms make normal profits but no economic profits

    Imperfect Markets

    • Imperfect markets deviate from the conditions of perfect competition
    • Types of imperfect markets:
      • Monopolies
      • Oligopolies
      • Monopolistic competition
    • Characteristics of imperfect markets:
      • Barriers to entry
      • Non-price competition
      • Interdependence of firms
      • Potential for economic profits
    • Dynamics of imperfect markets:
      • Revenue and cost curves
      • Profit maximization
      • Market efficiency
      • Regulatory impact
    • Implications of imperfect markets:
      • Allocative and productive inefficiencies
      • Welfare losses
      • Potential for government intervention

    Market Failures

    • Market failures occur when the price mechanism fails to allocate resources efficiently
    • Causes of market failures:
      • Externalities
      • Public goods
      • Merit and demerit goods
      • Imperfect competition
      • Asymmetric information
      • Immobile factors of production
      • Imperfect distribution of income and wealth
    • Consequences of market failures:
      • Inefficiencies
      • State intervention
      • Economic inequities
      • Externalities
    • Cost-benefit analysis:
      • Evaluates the social costs and benefits of interventions
      • Helps determine whether benefits exceed costs

    Economic Pursuits

    • Protectionism:
      • Definition: Government actions that restrict or restrain international trade
      • Common tools: Tariffs, quotas, and subsidies
      • Arguments: Infant industry, preservation of jobs, national security, prevention of dumping, and economic diversification
    • Free Trade:
      • Definition: Elimination of discrimination against imports and exports
      • Benefits: Specialization, economies of scale, enhanced consumer choice, innovation, and improved international relations
      • Arguments: Access to goods and services, economic efficiency, and economic growth
    • Evaluating South Africa's trade policies:
      • Export promotion
      • Import substitution
      • Major trade protocols and relationships

    Growth and Development

    • Economic Growth vs. Economic Development:
      • Economic growth: Increase in a country's real GDP or real GDP per capita
      • Economic development: Broader concept that includes economic growth, improvements in standards of living, income equity, and general well-being
    • Demand-side approach to economic growth:
      • Increased government expenditure
      • Redistribution of income
      • Import substitution
      • Export promotion
    • Supply-side approach to economic growth:
      • Improving the quality of the labor force
      • Managing and using natural resources
      • Accumulating capital goods
      • Advancements in technology
      • Entrepreneurship
    • Approaches used in South Africa:
      • Reconstruction and Development Programme (RDP)
      • Growth, Employment and Redistribution (GEAR)
      • Accelerated and Shared Growth Initiative of South Africa (Asgi-SA)
      • New Growth Path (NGP)
    • The North/South divide:
      • Economic divide between developed and developing countries
      • Disparities in income levels, economic stability, and access to resources

    Perfect Markets

    • A perfectly competitive market is characterized by:
      • Many buyers and sellers
      • Homogeneous products
      • Perfect information
      • Freedom of entry and exit
      • No government regulation
      • Complete mobility of factors of production
    • In a perfectly competitive market, individual businesses:
      • Are price takers
      • Have no influence over market prices
      • Focus on maximizing profits
    • Key revenue and cost concepts:
      • Total revenue (TR)
      • Average revenue (AR)
      • Marginal revenue (MR)
      • Total cost (TC)
      • Average cost (AC)
      • Marginal cost (MC)
    • Decision-making in a perfectly competitive market:
      • Firms maximize profit where marginal revenue equals marginal cost
      • If marginal revenue exceeds marginal cost, firms should increase production
      • If marginal revenue is less than marginal cost, firms should reduce production
    • Long-term dynamics in perfect markets:
      • Firms adjust output in response to profits and losses
      • Entry and exit of firms occur based on profitability
      • Equilibrium is reached when firms make normal profits but no economic profits

    Imperfect Markets

    • Imperfect markets deviate from the conditions of perfect competition
    • Types of imperfect markets:
      • Monopolies
      • Oligopolies
      • Monopolistic competition
    • Characteristics of imperfect markets:
      • Barriers to entry
      • Non-price competition
      • Interdependence of firms
      • Potential for economic profits
    • Dynamics of imperfect markets:
      • Revenue and cost curves
      • Profit maximization
      • Market efficiency
      • Regulatory impact
    • Implications of imperfect markets:
      • Allocative and productive inefficiencies
      • Welfare losses
      • Potential for government intervention

    Market Failures

    • Market failures occur when the price mechanism fails to allocate resources efficiently
    • Causes of market failures:
      • Externalities
      • Public goods
      • Merit and demerit goods
      • Imperfect competition
      • Asymmetric information
      • Immobile factors of production
      • Imperfect distribution of income and wealth
    • Consequences of market failures:
      • Inefficiencies
      • State intervention
      • Economic inequities
      • Externalities
    • Cost-benefit analysis:
      • Evaluates the social costs and benefits of interventions
      • Helps determine whether benefits exceed costs

    Economic Pursuits

    • Protectionism:
      • Definition: Government actions that restrict or restrain international trade
      • Common tools: Tariffs, quotas, and subsidies
      • Arguments: Infant industry, preservation of jobs, national security, prevention of dumping, and economic diversification
    • Free Trade:
      • Definition: Elimination of discrimination against imports and exports
      • Benefits: Specialization, economies of scale, enhanced consumer choice, innovation, and improved international relations
      • Arguments: Access to goods and services, economic efficiency, and economic growth
    • Evaluating South Africa's trade policies:
      • Export promotion
      • Import substitution
      • Major trade protocols and relationships

    Growth and Development

    • Economic Growth vs. Economic Development:
      • Economic growth: Increase in a country's real GDP or real GDP per capita
      • Economic development: Broader concept that includes economic growth, improvements in standards of living, income equity, and general well-being
    • Demand-side approach to economic growth:
      • Increased government expenditure
      • Redistribution of income
      • Import substitution
      • Export promotion
    • Supply-side approach to economic growth:
      • Improving the quality of the labor force
      • Managing and using natural resources
      • Accumulating capital goods
      • Advancements in technology
      • Entrepreneurship
    • Approaches used in South Africa:
      • Reconstruction and Development Programme (RDP)
      • Growth, Employment and Redistribution (GEAR)
      • Accelerated and Shared Growth Initiative of South Africa (Asgi-SA)
      • New Growth Path (NGP)
    • The North/South divide:
      • Economic divide between developed and developing countries
      • Disparities in income levels, economic stability, and access to resources

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    Learn about perfect markets in microeconomics, characterized by perfect competition, and understand the characteristics that ensure maximum efficiency and equitable resource distribution.

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