How Markets Fail?

Question 1

What is a Pure Monopoly?

Answer 1

One firm has 100% of the market share.

Question 2

What is a monopoly?

Answer 2

A firm dominates a market with 25% or more of the market share.

Question 3

Define Duopoly.

Answer 3

Two firms dominate the market.

Question 4

Define Perfect Competition.

Answer 4

Larger number of firms, no barriers to entry, all producers have equal shares of the market and set at the same price.

Question 5

Define Perfect Information.

Answer 5

Every known fact about all companies is hated with everybody.

Question 6

What is Profit Maximisation?

Answer 6

Firms Total sales revenue is furthest above total costs.

Question 7

What is Sales Maximisation?

Answer 7

Revenue is maximised.

Question 8

What is Market Share Maximisation?

Answer 8

Maximises share of Market.

Question 9

Define Concentration Ratio.

Answer 9

Number of firms in a market.

Question 10

What is a Social Cost?

Answer 10

Cost to community as an effect of a good.

Question 11

What is a Private Cost?

Answer 11

Cost to a firm of making goods.

Question 12

What is a Social Benefits?

Answer 12

Effect on community.

Question 13

What is a Private Benefit?

Answer 13

Effect on individual.

Question 14

Define externalities.

Answer 14

Unintentional consequences on a third party.

Question 15

Define Complete Market Failure.

Answer 15

No market exists e.g. Military.

Question 16

Define Partial Market Failure.

Answer 16

Market exists but it’s misallocated.

Question 17

What is Rationing?

Answer 17

Eliminates shortages by having higher prices.

Question 18

What is Allocating?

Answer 18

Resources moving from where they not wanted to where they are.

Question 19

What is Signalling?

Answer 19

Prices go up, firms know to enter market and prices go down, firms know to leave market.

Question 20

Define Income.

Answer 20

Salary and is the flow of money.

Question 21

Define Wealth.

Answer 21

Things you own and is the stock.

Question 22

What is inequality?

Answer 22

Difference between highest and lowest. Wealth has a larger gap.

Question 23

What is Social Mobility?

Answer 23

Moving from the bottom to the top.

Question 24

What is the Invisible Hand of the Market?

Answer 24

If left alone the market ensures resources are allocated the best it could be.

Question 25

Define immobility.

Answer 25

Barriers that make inability of labour moving.

Question 26

What is Geographical Immobility?

Answer 26

Issues over moving from different areas e.g. rent to high to move.

Question 27

What is Occupational Immobility?

Answer 27

Issues over skills being too specific e.g. Labourers not being able to move to an office job.

Question 28

Define Negative Externalities in Production.

Answer 28

Social costs outweigh private costs e.g. pollutions.

Question 29

Define Positive Externalities in Production.

Answer 29

Private costs outweigh social costs e.g. technology.

Question 30

Define Negative Externalities in Consumption.

Answer 30

Social benefits outweigh private benefits e.g. smoking

Question 31

Define Positive Externalities in Consumption.

Answer 31

Private benefits outweigh social benefits e.g. education.

Question 32

Define Asymmetric Information

Answer 32

One party has more information that the other, knowledge isn’t perfect.