How Markets Fail? Flashcards
What is a Pure Monopoly?
One firm has 100% of the market share.
What is a monopoly?
A firm dominates a market with 25% or more of the market share.
Define Duopoly.
Two firms dominate the market.
Define Perfect Competition.
Larger number of firms, no barriers to entry, all producers have equal shares of the market and set at the same price.
Define Perfect Information.
Every known fact about all companies is hated with everybody.
What is Profit Maximisation?
Firms Total sales revenue is furthest above total costs.
What is Sales Maximisation?
Revenue is maximised.
What is Market Share Maximisation?
Maximises share of Market.
Define Concentration Ratio.
Number of firms in a market.
What is a Social Cost?
Cost to community as an effect of a good.
What is a Private Cost?
Cost to a firm of making goods.
What is a Social Benefits?
Effect on community.
What is a Private Benefit?
Effect on individual.
Define externalities.
Unintentional consequences on a third party.
Define Complete Market Failure.
No market exists e.g. Military.
Define Partial Market Failure.
Market exists but it’s misallocated.
What is Rationing?
Eliminates shortages by having higher prices.
What is Allocating?
Resources moving from where they not wanted to where they are.
What is Signalling?
Prices go up, firms know to enter market and prices go down, firms know to leave market.
Define Income.
Salary and is the flow of money.
Define Wealth.
Things you own and is the stock.
What is inequality?
Difference between highest and lowest. Wealth has a larger gap.
What is Social Mobility?
Moving from the bottom to the top.
What is the Invisible Hand of the Market?
If left alone the market ensures resources are allocated the best it could be.
