Econ Market Structures

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18

Corporations cover _% of all business in the US

70

Corporations generate _% of all US profit

90

Corporations generate _% of all US sales

John Wanamaker

"Half the money I spend on advertising is wasted; the trouble is I don't know which half" who said this?

False

(T/F) a cartel is most successful when each member produces as much product as possible

False

(T/F) firms selling identical products create monopolistic competition

True

(T/F) price fixing is an outcome of collusion

True

(T/F) providing better customer service, introducing a new lipstick color, and sophisticated advertising are examples of nonprice competition

Game theory

- Walgreens and CVS right next to each other - McDonalds and Wendys right next to each other

Perfect competition

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

Geographic monopoly

A monopoly based on location

Price discrimination

A monopoly offering targeting discounts is practicing what

Efficiency

A natural monopoly is a government allowed monopoly in the name of _

7

A partnership covers _% of all US business

Commodity

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

Regulated, double

Corporations are the most _ of all businesses and owners get _ taxes

Sherman anti-trust act

Anti-monopoly law passed about 1898

Barrier to entry

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

Few

Are there many or few monopolies

Cooperatives

Buy in bulk to get the product cheaper or work to get the product

Stocks, bonds

Corporations can sell _ and _ which gives them a big advantage

Economies of scale

Characteristics that cause a producers average cost to drop as production rises

Price discrimination

Charging different entities different prices for the exact same product

Taxed

Company gets _, then return on investment gets _

Barriers to entry, high start up costs

Conditions encouraging formation for oligopolies

Wide variety of goods to choose from

Consumer advantages in monopolistic competition market structures

Rivals make better products, new firms bring lower prices

Curbs on high profits in monopolistic competition market structures

Many firms, few artificial barriers to entry, little control over price, differentiated products

Defining conditions of monopolistic competition market structures

Less competition

Do monopolies have more or less competition, or is it somewhere in between

In between, leaning more towards less competition

Do oligopolies have more or less competition, or is it somewhere in between

More competition

Does monopolistic competition have more or less competition, or is it somewhere in between

Non-profit organizations

Does not mean it doesn't make or handle a lot of money it just means that the money gets put back into the businesses

More competition

Does pure competition have more or less competition, or is it somewhere in between

Credit unions

Does the same thing that banks do just don't have to deal with shareholders

Product sells less. When the price is lowered it will sell more

Effect of a monopolist's price increase

Natural monopoly

Efficient production by a single supplier

Supply, demand

Everything in market structure is a result of _ and _

Major League Baseball

Example of industrial monopoly

Agricultural products, fishery

Examples of Perfect competition

Gas stations, women's clothing

Examples of monopolistic competition

Automobiles, aluminum

Examples of oligopoly

Cable tv, water

Examples of pure monopoly

Patent

Exclusive right to a product for approximately 17 years

Physical characteristics, location, service level, advertising, image, or status

Forms of nonprice competition in monopolistic competition market structures

Legal

Generally speaking, monopolies in the US are not _

Crony-Capitalism

Getting government to eliminate the competition usually through bribery (family relations or payment)

When marginal costs = marginal revenue

How a monopolist maximizes profits

Market structures

How businesses have to react because of the kind of market structure they're in and because of the kind of competition they have to face

Few

In an oligopoly, a _ very large sellers dominate the industry

Substitutes

In a monopoly, one seller dominates the market with no close _

One

In a monopoly, there is only _ seller of a particular product (one seller, one product)

Illegal

Is collusion illegal or legal inside the US

Levels of competition

Market structures are also known as

Consumer advantages

Means prices will be lower

Monopolistic competition

Meets all conditions of perfect competition except for identical products

Extensive

Monopolistic competition - advertising

Easy

Monopolistic competition - entry into market

Some

Monopolistic competition - influence over price

Many

Monopolistic competition - number of firms in industry

Fair amount

Monopolistic competition - product differentiation

Product differentiation

Monopolistic competition is virtually the same as pure competition except for _ _

Nonprofessional

Monopolistic competitors use _ competition

Inelastic

Monopolists products tend to be _

Complete supply

Natural monopolies have the advantage of _ _

Technological monopoly

New invention with a patent

Price leadership

Oligopolists act independently by lowering prices soon after the first seller announces the cut

Wars

Oligopolists engage in price _

Collusion

Oligopolists uses a _ which is a formally agreed to set prices (cartel)

Extensive

Oligopoly - advertising

Difficult

Oligopoly - entry into market

Fair amount

Oligopoly - influence over price

Few

Oligopoly - number of firms in industry

Fair amount with differentiated oligopolies

Oligopoly - product differentiation

Sole proprietorship

Owned by just one entity

10

Partnerships generate _% of all US income

5

Partnerships generate only _% of US sales

Clayton anti-trust act

Passed about 1914. Also anti-monopoly law. With this law you could sue people (the ability to sue additionally made it a civil law)

None

Perfect competition - advertising

Easy

Perfect competition - entry into market

None

Perfect competition - influence over price

Very many

Perfect competition - number of firms in industry

None

Perfect competition - product differentiation

Cartels, price leadership, collusion

Practices that concern government in oligopolies

Negatively (inversely) related

Price-output relationship in monopolistic competition market structures

Large, well-informed

Pure competition has a _ number of buyers and sellers that are _-_

Identical

Pure competitors sell _ products

None

Pure monopoly - advertising

Almost impossible

Pure monopoly - entry into market

Extensive

Pure monopoly - influence over price

One

Pure monopoly - number of firms in industry

None

Pure monopoly - product differentiation

Marginal revenue is less than price

Relationship between price and marginal revenue when a monopolist cuts the price to sell more

75%

Sole proprietorship is _% of all US businesses

6

Sole proprietorships generate only _% of US sales

Cartels

The US cannot control _ outside of the US because they aren't illegal in other countries

Law of demand

The _ of _ applies to monopolies

Capital

The biggest problem a business has is a lack of _

Assigning geographical areas to provide necessary services

The government plays a role in natural monopolies by doing what

Competition

There are geographic monopolies in small towns because the area cannot support _

Many buyers and sellers compete to offer their commodities to buyers

What causes prices to be forced down to the point where they just cover the seller's costs of doing business

Retail, soft drinks, breakfast cereal, automobiles

What are four examples of oligopolies

Non-profits, cooperatives, credit unions, charity organizations

What are the 4 non-profit organizations

Sole proprietorship, partnership, corporations, business franchise

What are the four for-profit business organizations

Pure/perfect competition, monopolistic competition, oligopoly competition, monopoly competition

What are the four types of market structure competition

Customer service, fast food

What are two examples of advertising in monopolistic competition

Individual radio and tv shows

What are two examples of government monopolies by license

Microsoft, bell south

What are two examples of monopolies

Public water, cable television

What are two examples of natural monopolies

Advertising, giveaways

What are two examples of nonprofessional competition

Agricultural products, stock market

What are two examples of pure competition

The buyer wont pay extra for one particular company's goods

What causes identical products to be the key in perfect competition

No one supplier can influence prices

What causes producers to adjust their output decisions based on their most efficient use of available land, labor, and capitol (ex: agricultural products)

Lots of buyers and sellers dont work together

What causes the market to determine the price without influence from suppliers or consumers

Technological

What is a government monopoly that is set up by patents

Alabama power

What is one example of a natural monopoly

Segway

What is one example of a technological monopoly

Markets with high start up costs are less likely to be perfectly competitive markets

What is the effect of entrepreneurs being less likely to enter a market with high start-up costs

Can lead to imperfect competition thus shutting down companies

What is the effect of firms sometimes not being able to make enough money to stay in business

Stronger, ruthless

When Rockefeller said "large companies are examples of survival of the fittest" he meant that the _ eliminates the weaker so you have to be strong, essentially _ or cold hearted

Ensure that resources are not wasted by building additional plants when only one is needed

Why do natural monopolies exist

Guarantees the companies can profit from their own research without competition

Why government grants patented monopolies


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