Econ Market Structures
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
