Factors of Production & Competition Flashcards
What are the 4 factors of production?
- Natural resources
- Capital
- Human resources
- Entrepreneurship
Define natural resources.
Land and non-renewable resources that come from the land (water, wind, minerals, fish)
Define capital. Is it just money?
Man-made resources (machines, tools, buildings, technology)
No, can be money but not only money. Money in itself is not a factor of production.
Define human resources.
Physical, intellectual and creative contributions of people (human resources)
Define entrepreneurship.
Financial risk-takers who capture business opportunities
Define pure competition and give an example.
- Large numbers of firms producing a standardized product
- Market pricesare determined byconsumer demand; no supplier has any influence over the market price
- Low barrier of entry into the business
Ex: agricultural products, such as corn, wheat, and soybeans.
Define monopolistic competition and give an example.
-Many suppliers
-Barriers to entry are low -Suppliers try to achieve some price advantages by differentiating their products
from other similar products.
-Suppliers try to differentiate their product as being better, so that they can justify higher prices or to increase market share.
ex: health and beauty aids
Define oligopoly and give an example.
- Few suppliers
- Prices and output by an oligopoly are based onstrategic decisions
Ex: Auto manufacturers, because the fixed costs of automobile manufacturing are very high, thus limiting the number of firms that can enter into the market.
Define monopoly and give an example.
- Has pricing power within the market
- One supplier who has significant market power and determines the price of its product
- Little competition
- High barriers to entry, such as high initial costs
- Significant market influence through network effects, such as Facebook, for instance.
ex: the production of operating systems by Microsoft.
