Econ Chapter 7

What is an oligopoply?

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

How does a perfect market influence output?

Each firm adjusts its output so that its cost, included profit, are covered.

Why is adequate information needed by the buyers and sellers in a market?

Information is needed to make a economic decisions.

Why will a monopolist charge less than the highest price possible?

To obtain the highest possible total revenue

*The industry in the U.S. that most closely resembles perfect competition is agriculture.*

True

What do externalities indicate?

a market failure

Pure monopoly means:

a single firm producing a product for which there are no close substitutes.

For price discrimination to work a firm must have

all of the answers

If a shoe company pays a professional athlete to wear shoes its makes, it is an example of

all of the answers

Which of the following do economists use to classify markets?

all of the answers

*Which of the following industries is not an example of an oligopoly?*

automobile repair

Which of the following is NOT an example of oligopoly?

automobile repair

Which of the following is a characteristic of pure monopoly?

barriers to entry

One role of the federal government's Justice Department is to

break up monopolies

__________ is an illegal agreement among producers to fix prices, limit output, or divide markets.

collusion

A calculation that compares the cost of an action to its benefits is called

cost-benefit analysis

A plant in the town of Klein closes, leaving hundreds of people unemployed. There are jobs available at a similar plant in another state, nut many of the unemployed workers are unwilling to move or cannot afford the move. An economists might use this example to

define resource mobility

*Which of the following is NOT a form of nonprice competition?*

discounts

Patents are a form of monopoly that society allows because they

encourage firms to research and develop new products that benefit society as a whole.

*The Sherman Act, Clayton Act and the Federal Trade Commission Act were all designed to do what?*

enforce competition

In monopolistic competition, profits well in excess of cost is unlikely because

established rivals and new firms would lure customers away with slightly different and/or cheaper products.

A cartel is able to survive only if

every member keeps to the agreed output levels.

An unintended side effects that either benefit or harm a third party not involved in the activity that caused it is called a(n)

externality

*An example of a barrier to entry is*

high start up costs

Compared to a market with perfect competition, a monopoly has

higher prices and fewer goods

A major characteristic of monopolistic competition is that prices will be

higher than in perfect competition

A government's purpose in giving antitrust exemption to sports leagues is to

keep team play orderly and stable.

Before government approves a merger, companies must prove that the merger would

lower costs and consumer prices or lead to a better product.

In many industries, deregulation has resulted in

lower prices for consumers

A condition that has none of the requirements for a competitive market such as adequate competition, knowledge of prices and opportunities, mobility of resources, and competitive profits is called a(n)

market failure

Prices reasonably reflect production costs when

markets are competitive

Which statement is most accurate?

markets can sometimes fail

*Market structure in which many companies sell products that are similar but not identical*

monopolistic competition

___________ is a market structure having all conditions of pure competition except for identical products.

monopolistic competition

A new firm finds it almost impossible to enter an industry dominated by

monopoly

Which market structure is defined by a single producer?

monopoly

Which of the following is market in which there is only one buyer

monopsony

*Harm suffered by a third party because of the actions of others are called*

negative spillovers

*What is based on a products appearance, quality or design?*

nonprice competition

Offering products of different tastes and shapes is an example of

nonprice competition

__________ is based on a product's appearance, quality, or design.

nonprice competition

Which of the following can cause market failure?

not enough information

__________ is a market structure in which a few large seller's dominate and have the ability to affect prices in the industry.

oligopoly

A natural monopoly is a market that runs most efficiently when it has

one large firm providing all output

*A market that is a monopoly has*

one seller and many buyers

A market that is a monopoly has

one seller and many buyers

*A license that gives the inventor of a new product the exclusive right to sell*

patent

The government claimed that, to illegally extend its control over the market, Microsoft had used

predatory pricing and required costumers to buy other Microsoft products.

What condition differentiates a market of pure competition from one of monopolistic competition?

products

Economic products that are paid for and consumed collectively, such as highways, national defense, police and fire protection are called

public goods

________ is a theoretical market structure that requires three conditions: very large numbers, identical products, and freedom of entry and exit.

pure competition

In which of the following industry structures is the entry of new firms the most difficult?

pure monopoly

*Large numbers, identical products, and easy entry and exit is closest to what structure?*

pure/perfect competition

An example of a public disclosure law is

requiring content labels on food products.

Antitrust laws allow the U. S. government to do all of the following EXCEPT

stop firms from selling new products.

*Under perfect competition, what sets the equilibrium price in the market?*

supply and demand

*Besides start up costs, what is another barrier to entry?*

technology

*Which is an example of a public good?*

the army

The controller of a monopoly sets the price of goods by charging

the price at which profit is maximized.

Milk is considered to be a commodity because it is which of the following?

the same product regardless of who sells it.

The market structure called perfect competition is best described as

theoretical

What happens when some of the costs or benefits associated with production and consumption fall on someone other than the producers or consumers of a product?

there are unintended effects or spillovers

Innovations like cellular phones can affect government's antitrust policies because

they can mean the need for regulations no longer exists.

What is the purpose of a cartel?

to restrict supply so that prices rise

*The federal government can block the merger of two companies if harmful to consumers*

true

Which of the following is an example of resource mobility?

An engineering taking a job at a different.

What is the relationship between start-up costs and a competitive market?

Market leaders with high start-up costs are less likely to be perfectly competitive.

Which type of market competition has the characteristics of many firms, few barriers to market entry, slight control over price and differentiated products?

Monopolistic competition

Which of the following is a cartel?

OPEC

Which of the following is NOT a barrier to entry into a market?

Service