chapter 6, the good that competition does

Question 1

the result of competition is better goods at lower prices for _______

Answer 1

everybody

Question 2

makes possible a better standard of living for everyone in a prosperous way

Answer 2

competition

Question 3

groups of firms that produce similar products or provide similar services

Answer 3

industries

Question 4

four main types of market models

Answer 4

perfect competition
monopolies
monopolistic competiton
oligopolies

Question 5

purest form of competition

Answer 5

perfect competition

Question 6

for an industry to be perfectly competitive it must have each of the following characteristics:

Answer 6

must have both independent sellers and buyers
must be one in which all firms produce a standardized product
firms must have free access to the market
relevant market info must be made available to all firms and buyers

Question 7

each firm in the market is known as a _______

Answer 7

price taker

Question 8

the situation that arises when a single firm is the only supplier of a good for which no substitute exist

Answer 8

monopoly

Question 9

three things necessary for a monopoly

Answer 9

a firm must be the sole supplier of a good or service
there must be no close substitute for the firm’s product
entry into the market must be blocked

Question 10

governments often grant ______ in certain areas in order to encourage production

Answer 10

legal monopolies

Question 11

occurs when a single firm can fill the demand for a good more efficiently than if there were multiple firms in the industry

Answer 11

natural monopoly

Question 12

the market is one in which each firm promotes a differentiated product

Answer 12

monopolistic competition

Question 13

three characteristics for monopolistic competition

Answer 13

there must be a large number of firms in the market
these firms provide differentiated products
firms are able to easily enter or exit the market

Question 14

a market that occurs when an industry is dominated by only a few firms

Answer 14

oligopoly

Question 15

three characteristics of an oligopoly

Answer 15

there are only a few firms in the entire industry
firms in an oligopoly many sell products that are either differentiated or virtually the same
potential firms are discouraged by the existence of significant entry barriers

Question 16

the result of most or all of the firms in an industry agreeing to charge high prices

Answer 16

collusion

Question 17

the biggest defender of the american freedom from harmful monopolies

Answer 17

the operation of the free market itself

Question 18

two of the most important acts under the antitrust laws

Answer 18

sherman act, clayton act

Question 19

government agency whose purpose is to investigate trade practices

Answer 19

federal trace commission (FTC)

Question 20

force the consumer to buy a certain product before he can buy the product he really wants

Answer 20

tying contracts

Question 21

selling the same type of goods at different prices to different buyers

Answer 21

price discrimination

Question 22

a collusion of businesses which join together to restrict or eliminate competition

Answer 22

a trust

Question 23

four situations in which the government may need to stop the abuse of the market

Answer 23

when a business threatens the safety or health of the consumer through fraud or deceit
when a business compromises national security
when a national emergency disrupts the normal market cycle
when an industry is under a natural monopoly