Econ Ch. 7 Vocab / Notes

characteristics of monopolistic competition

- Many Firms Low start up costs, easy for firms to join the market - Few artificial barriers to entry - Little control over price there are many easily available substitute goods - differentiated products - ex.) restaurants

example of economies of scale

-hydroelectric plants -solar panels

what are the four characteristics of a perfect competitive market

-many buyers and sellers -identical products -informed buyers and sellers -free market

example of natural monopolies

-public water -electricity

name and explain the 4 types of nonprice competition

1. *Physical Characteristics*: simplest way for a firm to distinguish its products i.e. color 2. *Location*: where a good is sold can indicate success of a firm 3. *Service Level*: offer a high level of service 4. *Advertising, image or status*: point out differences between own product and others in the market

what are the 3 limits of price discrimination

1. Some market power is necessary 2. Distinct customer groups must be visible to the firm (hard when you sell stuff online) 3. Difficult resale→ price discrimination works best for things consumed on the spot like meals or tickets (kid's meal)

Oligopoly: *Cooperation and Collusion* - oligopolistic firms seem to work like a monopoly - government creates competition - price war - collusion - price fixing - Cartels

?? I have no idea what this means ??

example of target discount

Discounted airline fares (target frequent flyer)

can an individual become powerful enough to control the market (in terms of influence price and influencing quantity)? why or why not?

NO, because when you have a lot of ppl involved, one person cannot change the quantity or price

franchise example

National Park Service (ex. coke products can be exclusively sold in restaurants etc.)

technological monopoly

a monopoly created by the government issuing patents to a company -ex.) laptops, silly bands

laws that encourage competition in the marketplace

anti-trust law

any factor that makes it difficult for a new firm to enter a market

barrier to entry

price discrimination is based on what idea?

based on the idea that each customer has a max price that he/she will pay

in a monopoly, number of _______ is variable

buyers

a market w/ perfect competition requires many participants on both the _______ and _______ sides

buying and selling

a formal organization of producers that agree to coordinate prices and production

cartel

an illegal agreement among firms to divide the market, set prices, or limit production

collusion

a product, such as petroleum or milk, that is considered the same no matter who produces or sells it

commodity

the goal of deregulation is to promote ___________

competition

______________ allowed or forced firms to compete by eliminating many price controls and barriers to entry

deregulation

the removal of some government controls over a market

deregulation

technology may _______ a natural monopoly

destroy ex.) telephone cables were difficult to install→ no companies wanted to compete.. then, cell phones made competition efficient

making a product different from other similar products

differentiation

factors that causes a producer's average cost per unit to fall as output rises

economies of scale

perfectly competitive markets are ________

efficient

a contract that gives a single firm the right to sell its goods within an exclusive market

franchise

a monopoly created by the government

government monopoly

a monopoly can take advantage of the market and charge ____ prices

high

in an oligopoly, there are ______ (high/low) start up costs

high (ex. economies of scale→ average cost of production decreases as output increases... initially it is expensive to create)

a market structure that fails to meet the conditions of perfect competition

imperfect competition

buyers and sellers have incentive to come up with as much ___________ as possible

information

ideally, in a perfect competition market, buyers and sellers have the right __________

information

ideally, in a perfect competition market, there _____ (is / isn't) a difference between the products sold by different suppliers

is not

license example

land, television, and radio broadcasting frequencies

markets with high start up costs are _____ (more/less) likely to be in perfectly competitive markets

less

a government issued right to operate a business

license

competition keeps both prices and production costs ___

low

markets with more firms have more competition and _______ prices, when one firm can keep others out of the market it can sell at a _______ price

lower higher

corporate mergers will lower overall average costs which can lead to _______ prices, more _______ products/ service, and more ________ industry

lower reliable efficient

in a market w/ perfect competition, the buyer will not pay extra for a particular company's good→ always chose the _______ price

lowest

prices are the _______ sustainable price possible in a perfectly competitive market

lowest

price discrimination can be practiced by any company with _________ ________

market power

the ability of a company to control prices and total market output

market power

when two or more companies join to form a single firm

merger

government had power to prevent the rise of monopolies by blocking ________

mergers

in a perfectly competitive market, firms must be able to enter the market when they can make ______ and ______ when they cannot earn enough to stay in business

money leave

a market structure in which many companies sell products that are similar but not identical

monopolistic competition

a market in which a single seller dominates

monopoly

a market that runs most efficiently when one large firm supplies all of the output

natural monopoly

a way to attract customers through style, service, or location, but not a lower price

non-price competition

a market structure in which a few large firms dominate a market

oligopoly

a license that gives the inventor of a new product the exclusive right to sell it for specific period of time

patent

a market structure in which a large number of firms all produce the same product and no single seller controls supply or prices

perfect competition

the government can regulate business practices if the company already has a lot of ________ and few __________

power competitors ex. microsoft

selling a product below cost for a short period of time to drive competitors out of the market

predatory pricing

the division of consumers into groups based on how much they will pay for a good

price discrimination

an agreement among firms to charge one price for the same good

price fixing

a series of competitive price cuts that lowers that market price below the cost of production

price war

in an oligopoly, there are significant barriers for entry that do what?

significant barriers for entry that keep new companies from entering the market to compete with existing firms

the government has broken up several monopolies throughout history... name some examples

standard oil, AT&T

the expenses a new business must pay before it can begin to produce and sell goods

start up costs

a monopoly is characterized by supplying a unique product→ no close _________

substitute

entrepreneurs cannot easily enter the market without ________, making the market imperfect

training

an illegal grouping of companies that discourages competition, similar to a cartel

trust

deregulation ________ (strengthens/weakens) government control

weakens

industrial organizations

when the government allows certain industries to restrict the number of firms in the market -ex.) major league baseball teams

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