Class 2

Question 1

What is COMPETITION?

Answer 1

Competition is rivalry among businesses for sales to potential
customers.

Question 2

Perfect Competition

Answer 2

• The market situation in which there are many buyers and sellers of a product.
• No single buyer or seller is powerful enough to affect the price.
• The market price is set by forces of supply & demand.
  The entry and exit to such a market are free.
  ▪ The firms don’t have price control, so they don’t have a
  pricing policy.
  ▪ A seller has to accept price determined by market supply and
  demand forces.
  ▪ The product offered by all sellers is the same in all respect so
  no firm can increase.
  ▪ Unrealistic situation!

Question 3

Monopolistic Competition

Answer 3

-A market situation in which there are many buyers with a relatively large
number of sellers.
* Sellers try to gain a competitive edge through
* product differentiation –
* Monopolistic competition has features of both the market structures perfect
competition and monopoly.
* Firms are selling products with certain differences in quality, quantity, features,
so firms have pricing control and pricing policies.
* Entry and exit into the industry are easy because of fewer barriers.
* Product differentiation is one of the features of monopolistic competition.

Question 4

Oligopoly

Answer 4

• A market situation in which there are few sellers.
• The market actions of each seller have a strong effect on competitors’ sales and
  prices.

Question 5

Monopoly

Answer 5

• A market with only one seller, or there are barriers to keep other firms from
  entering the industry.
• No close substitute for the product or service sold.
• Ex) public utilities

Question 6

What is International
Business?

Answer 6

All business activities that involve
exchanges across national boundaries.

Question 7

Country’s Advantage

Answer 7

Different resources in different countries

Question 8

Absolute Advantage

Answer 8

The ability to produce a specific product more efficiently than any other nation.

Question 9

Comparative Advantage

Answer 9

The ability to produce a specific product more efficiently than any other product.

Question 10

Trade Deficit

Answer 10

a negative (unfavorable) balance of trade where imports exceed exports in value.

Question 11

Trade Surplus

Answer 11

a positive balance of trade where exports exceed imports in value.

Question 12

What are Tariffs?

Answer 12

• A tax that is levied on a particular foreign product entering a country.
• This tax has the effect of raising the price of the product in the importing
  nation.

Question 13

Revenue Tariffs

Answer 13

are imposed to generate income for the government.

Question 14

Protective tariffs

Answer 14

are imposed to protect a domestic industry from competition by keeping the prices of imports at or above the price of domestic products.

Question 15

Dumping

Answer 15

• The exportation of large quantities of a product at a lower price
  than that of the same product in the home market.

Question 16

Nontariff Barrier

Answer 16

A nontax measure imposed by government to favor domestic over
foreign suppliers.

Question 17

Type of nontariff barriers:

Answer 17

• Import quota: A limit on the amount of a particular good that can be
  imported during a given time.
• Embargo: A complete halt to trading with a particular nation or in a
  particular product. Embargoes may be imposed to accomplish foreign
  policy and national security goals.
• Foreign exchange control: A Restriction on amount of foreign
  currency that can be purchased or sold.
• Currency devaluation is the reduction of the value of a nation’s
  currency relative to the currencies of other countries.
• Bureaucratic red tape such as product testing and labeling can be
  one of the most frustrating trade barriers of all.
• Cultural attitudes can hinder acceptance of products in foreign
  countries

Question 18

Reasons against trade restrictions are:

Answer 18

• Higher prices result from the imposition of tariffs.
• Restriction of consumers’ choices.
• Misallocation of international resources.
• Loss of jobs opportunities.