Economics - 1 Flashcards
What are the characteristics of a Perfectly Competitive Market?
Consumers are able to obtain the lowest price in the long-run because companies are forced to operate at their most efficient levels in order to create a as low of a price as possible to compete.
Large Number of Suppliers and consumers acting independently and Firms are small compared to the industry
No Barriers to Entry
Very little product differentiation
Price Takers, price determined by the market
Firms Control only the quantity produced
Demand is perfectly Elastic
Economic Profits are Zero in the long run
What is the strategy under perfect competition
Maintaining the market share by adapting the sales price to the market conditions.
What is the point in which an industry is able to maximize profits? Equation
Marginal Revenue = Marginal Cost
A Natural Monopoly Exists because:
A natural monopoly exists when economic and technical conditions permit only one efficient supplier.
What are the characteristics
Numerous Firms with Differentiated Products
Ease of Entry - Few Barriers
Firms exact some influence over price and market
Non-price Competition is frequent and critical
Monopolistic Competition is characterized by:
A relatively large group of sellers who produce differentiated products.
Monopolistic competition is characterized by a relatively large number of sellers who produce differentiated products. There are few barriers to entry and firms exert some influence over the price and the market. Best examples are brand name consumer products.
Oligopoly market conditions are characterized by:
Few firms in the market Significant barriers to entry Differentiated products Fixed (or semi fixed) prices Kinked demand curves
Any Business firm that has the ability to control the price of the product it sell:
Faces a downward-sloping Demand Curve
Oligopoly and Monopoly.
In competitive markets, an increase in an effective minimum wage will:
Increase unemployment.
What is the process of strategic planning?
First defining the vision and mission statement
- Setting the goals and objectives
- Creating the strategic plan.
Under Monopolistic Competition, Strategic Plans focus on:
Maintaining the market share and planning for enhanced product differentiation.
Profit Maximization is monopoly
Continuous price responses to maintain market share is perfect competition
Coordinating production volume and price changes along with the product differentiation is a characteristic of oligopoly.
Elasticity of demand or supply is:
A measure of how sensitive the demand for or supply of a product is to a change in its price.
Product demand is more elastic when:
More substitutes are available or over a longer time period.
What happens when the price for a product is inelastic
An increase in price will result in an increase in total revenue.
The decrease in demand compared to the increase in price is proportionally smaller.
