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Econ 7
| Question | Answer |
|---|---|
| Perfect competition | A large number of firms all produce the same product and no single seller controls supply or prices |
| Commodity | A product such as milk, that is considered the same no matter who produces or sells it |
| Barriers to entry | Any factor that makes it difficult for a new firm to enter a market |
| Imperfect competition | A market structure that fails to meet the condition of perfect competition |
| Two common barriers that occur to stop a new business from entering a market. | Start-up costs and technology |
| Start-up costs | Expenses that a new business must pay before it can begin to produce and sell goods |
| Monopoly | A single seller dominates a market |
| Economics of scale | Factors that cause a producer's average cost per unit to fall as output rises |
| Natural monopoly | Market that rums most efficiently when one large firm supplies all of the output |
| Government monopoly | Created by a government |
| Patent | License that gives the inventor of a new product that exclusive right to sell it for a specific period of time |
| Franchise | Contract that gives a single form the right to sell its goods within a exclusive market |
| License | a government issued right to operate a business |
| Price discrimination | Division of consumers into groups based on how much they will pay for a good |
| Market power | Ability of a company to control prices and total market output |
| Examples of price discrimination | Discounted airline fares, manufactures rebate offers, senior citizen or student discounts, children fly free or stay free promotions |
| Monopolistic competition | Market structure in which many companies sell products that are similar but not identical |
| Monopolistic competition characteristics | Many firms, few artificial barriers to entry, little control over price, differentiated products |
| Differentiation | Making a product different from other, similar products |
| Nonprice competition | A way to attract customers through style, service, or location, but not at a lower price |
| Oligopoly | A market dominated by a few large, profitable firms |
| Price war | Series of competitive price cuts that lowers the market price below the cost of production |
| Collusion | Illegal agreement among firms to divide the market, set price, or limit production |
| Price fixing | Agreement among firms to charge one price for the same good |
| Cartel | Formal organization of producers that agree to coordinate prices and production |
| Predatory pricing | Selling a product below cost for a short period of time to drive competitors out of the market |
| Antitrust laws | Laws that encourage competition in the marketplace-government watches to make sure one business isn't driving another out of the market |
| Trust | Illegal grouping of companies that discourages competition |
| Merger | When two or more companies join to form a single firm |
| Deregulation | Removal of some government controls over a market |
Created by:
sudokken
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