Chapter 7: Market Structures Flashcards
economic model of competition within a particular industry
market structure
ideal model of a market economy
perfect competition
what are the 5 characteristics of perfect competition?
- many buyers and sellers
- standardized products
- freedom to enter and exit market
- independent buyers and sellers
- well-informed buyers
seller that accepts market price set by supply and demand
price taker
market structures that lack one or more of the conditions
imperfect competition
market structure with one seller, no substitutes for product
monopoly
organization of sellers that agree to set prices, limit output
cartel
business without competitors, can set prices
price maker
obstacle to entering market
- government regulations, size, resources, technology
barrier to entry
what are the 3 characteristics of a monopoly?
- only one seller
- a restricted, regulated government
- control of prices
cost of production lowest with only one producer
natural monopoly
government owns and runs or permits only one producer
government monopoly
one firm owns invention, technology method
technological monopoly
no other sellers within a region
geographic monopoly
give an example of a natural monopoly.
water company
- public utilities that require complex systems
average production cost falls as production grows
economies of scale
give an example of a government monopoly.
post office
legal registration of invention that gives invented sole rights, enables businesses to recover costs of development
patent
give an example of a technological monopoly.
polaroid camera, substitute of digital camera
give an example of a geographic monopoly.
professional sports teams
many sellers offer similar products
monopolistic competition
sellers try to distinguish there products from similar ones
product differentiation
use factors other than price to attract customers
non-price competition
expenses of entering new market
start-up costs
percent of total sales in the market
market share
market structure with only a few sellers offering similar products
oligopoly
what are the 4 characteristics to an oligopoly?
- few sellers, many buyers
- standardized or differentiated products
- more control of prices
- little freedom to enter or exit market
