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Microeconomics > Booklet 5 > Flashcards

Booklet 5 Flashcards

1
Q

What is called when colluding firms act together, effectively behaving as if they were one firm (usually to exert monopoly power)?

A

A cartel

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2
Q

What is it called when independent firms agree to jointly fix output or prices rather than competing?

A

Collusion

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3
Q

What is a government policy aimed at reducing monopoly power in order to protect consumers’ interests?

A

Competition policy

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4
Q

What is the proportion of sales in a market accruing to a given number of leading firms?

A

Concentration ratio

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5
Q

What is the process by which a state-owned firm hires a private firm to provide ancillary services?

A

Contracting out (contractualisation)

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6
Q

What is the tendency of consumers to remain with one provider (usually of services) when there may be a better value option available?

A

Customer inertia

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7
Q

What is the process of removing regulations?

A

De-regulation

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8
Q

What in game theory, is the most rewarding option for a “player” to pursue?

A

Dominant strategy

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9
Q

What is it called when firms enter a market in pursuit of economic profit and then leave the market once it has been exhausted?

A

Hit-and-run entry

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10
Q

What is called to charge each individual the maximum that they are prepared to pay for a product?

A

First degree price discrimination

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11
Q

What is called to charge a price that is so low that there is no incentive for firms to enter the market as it would be unprofitable to do so?

A

Limit pricing

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12
Q

What is the proportion of sales in a market accruing to a particular firm?

A

Market share

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13
Q

What is the highly competitive market structure with many firms who are able to differentiate their product?

A

Monopolistic competition

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14
Q

What is the outcome in a game where no player can improve their pay-off simply by changing their own decision?

A

Nash equilibrium

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15
Q

What is the process by which a firm or industry is taken into state ownership?

A

Nationalisation

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16
Q

What is an industry with very high fixed costs, which lends itself ideally to a single firm, so that average costs can be spread?

A

A natural monopoly

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17
Q

What is a market dominated by a few firms between whom there is conscious interdependence?

A

An oligopoly

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18
Q

What is a market with many buyers and sellers of a homogenous product, freedom of entry and exit and perfect knowledge called?

A

Perfect competition

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19
Q

What is it called to charge a price that is so low that rival firms cannot compete and are forced to leave the market?

A

Predatory pricing

20
Q

What is an agreement between rival firms to maintain prices that are artificially low (e.g. in paying suppliers) or high (charged to customers)?

A

Price fixing

21
Q

What is it called when firms follow the price set by the market leader without the need for an explicit agreement?

A

(Barometric) price leadership

22
Q

What is the practice of charging different consumers different prices for the same good or service?

A

Price discrimination

23
Q

What is the process by which a firm or industry is transferred from state ownership into private ownership?

A

Privatisation

24
Q

What is a market with literally just one seller with 100% market share?

A

Pure monopoly

25
Q

What is the tendency of the regulator in an industry to sympathise/side with producers rather than the consumers they are supposed to protect, causing government failure?

A

Regulatory capture

26
Q

What is selling off surplus capacity at a lower price or at a discount for buying in greater quantities called?

A

Second-degree price discrimination

27
Q

What is the monetary value of a firms’ sales in a given time period?

A

Sales value

28
Q

What is the number of units of output that a firm sells in a given time period?

A

Sales volume

29
Q

What is dividing a market into different sub-markets and charging different groups of people (with different willingness to pay) different prices called?

A

Third-degree price discrimination

30
Q

What is a firm with more than 25% market share?

A

A working monopoly

31
Q

Describe the spectrum of competition.

A

Most competitive to least competitive:

Perfect Competition

Monopolistic Competition

Oligopoly

Duopoly

Monopoly

32
Q

What are some aspects of the structure of the market?

A

Number and size of firms
Possibility of entry
Homogeneity/ Differentiation
Extent of knowledge
Extent to which one firms actions affect others

33
Q

What are some aspects of the conduct of a market?

A

Buyer/Seller Behaviour
Pricing
Advertising
Investment

34
Q

What are some aspects of the performance of a market?

A

Efficiency
Profit

35
Q

What type of concentration ratio would an oligopolistic market typically have?

A

High concentration ratios

36
Q

How can sales be measured?

A

Sales volume → the number of units sold
Sales value → the total value in monetary terms of all the output produced by a firm.

37
Q

Give the formula for market share.

A

x - firm concentration ratio = (sales of leading x firms / sales of whole industry) x 100

38
Q

What are the five key characteristics of a market which is perfectly competitive?

A

Many buyers and sellers
Goods are homogeneous
No barriers to entry/exit
Perfect Knowledge
Firms are ‘price-takers’ not ‘price-makers’

39
Q

What are the three characteristics that make monopolist competition similar to perfect competition?

A

Large number of firms in the market
No barriers to entry or exit
Only normal profit can be earned in the long run

40
Q

What is the characteristic that makes monopolistic competition different to perfect competition?

A

Goods are somewhat differentiate, therefore each firm faces a downward sloping demand/average revenue curve
As as result there is a lower and steeper MR curve

41
Q

Give three examples of oligopolistic markets

A

Film industry
Mobile Networks
Chocolate

42
Q

What happens in an oligopoly when one firm cuts its prices?

A

Everyone will follow

43
Q

What happens in an oligopoly when a firm puts its prices up?

A

Other firms won’t follow (+ gain more market share)

44
Q

What will firms use as non-price competition in an oligopolistic market?

A

Quality
Customer Service
After-sales service and warranties etc.
Advertising/Branding

45
Q
A

Microeconomics (7 decks)

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