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applied econ > L4: market structures > Flashcards

L4: market structures Flashcards

1
Q

What is a Competitive Market?

A

A market with many buyers and sellers trading identical products so that each buyer and seller is a price taker.

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2
Q

refers to how industries are classified and differentiated into:

  • Size Number of buyers and sellers
  • Barriers to entry and exit
  • Nature of the product or service
A

Market Structures

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3
Q

Market Structures refers to how industries are classified and differentiated into:

A
  • Size Number of buyers and sellers
  • Barriers to entry and exit
  • Nature of the product or service
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4
Q

It is characterized by a complete absence of rivalry among the individual firms.

A

Perfect Competition

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5
Q

Each individual player in the market is relatively small and cannot influence the market as a whole

A

Perfect Competition

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6
Q

Assumptions in Perfect Competition

A
  1. Large number of sellers and buyers
  2. Product homogeneity
  3. Free entry and exit of firms
  4. Profit Maximization
  5. No government regulation
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7
Q

Buyers and sellers are price takers.

A
  1. Large number of sellers and buyers
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8
Q

The technical characteristics of the product as well
as the services associated with its sale and delivery
is identical.

A
  1. Product homogeneity
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9
Q

Entry or exit may take time but firms have freedom
of movement in and out of the industry.

There is no barrier to entry and to exit.

A
  1. Free entry and exit of firms
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10
Q

The goal of all firms is profit maximization.

A
  1. Profit Maximization
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11
Q

There is no government intervention in the market
(tariffs, subsidies, rationing of production)

A
  1. No government regulation
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12
Q

There is only one supplier of a product or service

A

Monopoly

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13
Q

Products and services have no close substitutes

A

Monopoly

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14
Q

E.g
- gas,
- electricity,
- water,
- cable TV, and
- local telephone service companies

A

Monopoly

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15
Q

in monopoly the ff. conditions are essential:

A
  1. One and only one firm produces and sells particular commodity or a service.
  2. There are no rivals or direct competitors of the firm.
  3. No other seller can enter the market for whatever reasons – legal, technical or economic.
  4. Monopolist is a price maker.
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16
Q

Sources of Monopoly

A
  1. Legal Restrictions
  2. Capital Costs
  3. Natural Factor Endowment
17
Q
  • Some public sector services are statutory monopolies, which means their position is protected by law.
  • A monopoly position might also be protected by a patent.
A

(under sources of monopoly)
1. Legal Restrictions

18
Q

Certain business such as international airlines and chemical companies have relatively high set-up costs.

A

(under sources of monopoly)
2. Capital Costs

19
Q

A particular country has a monopoly in the supply of a particular commodity.

A

(under sources of monopoly)
3. Natural Factor Endowment

20
Q

It is a situation in which only few firms are competing in the market for a particular commodity.

A

Oligopoly

21
Q

Few sellers with identical products

A

Oligopoly

22
Q

Oligopoly Strategic Behavior

A
  1. Limit Pricing
  2. Price Retaliation
23
Q

Setting prices below the profit maximizing level in order to reduce the possibility of entry of new firms in the market.

A

(under Oligopoly Strategic Behavior)
1. Limit Pricing

24
Q

Firms may retaliate by reducing prices when entry actually occurs.

A

(under Oligopoly Strategic Behavior)
2. Price Retaliation

25
Q

A market structure in which there are many sellers
(and buyers) who are supplying goods that are
close, but not perfect substitutes.

A

Monopolistic Competition

26
Q

Within each product group, products and firms are different but close enough to compete with each other.

A

Monopolistic Competition

26
Q

Ex.
- Retail trade including restaurants, clothing stores, and convenience stores

A

Monopolistic Competition

27
Q

Each firm is, therefore, the sole producer of a particular brand or product.

A

Monopolistic Competition

28
Q

It is a monopolist as far as that particular brand is concerned.

A

Monopolistic Competition

applied econ (6 decks)

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