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Micro Economics > Lesson 8 > Flashcards

Lesson 8 Flashcards

1
Q

The envoronment can have different market conditions which can affect firms in different ways. Through the years, economists have identified characteristics of firms and categorized them into mainly 4 structures:

A
  1. Perfect Competition
  2. Monopolistic Completion
  3. Oligopoly
  4. Monopoly
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2
Q

Many firms sell the same goods or service.

A

Perfect Competition

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3
Q

Perfect competition, as economists wistfully point out, is an _____ of affairs, whicih unfortunately, does not exist in any industry

A

ideal state

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4
Q

______ attains the ideal of always being right.

A

Perfect Competition

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5
Q

Perfect Competition will be considered an ______ by which the other forms of competition-monompoly, monopolistic competition, and oligopoly- will be judged.

A

unattainable standard

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6
Q

Is a market structure ith many well-informed sellers and buyers of an identical products and no barriers to entering or leaving the market.

A

Perfect Competition

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7
Q

Perfect competition is a market structure composed of 3 characteristics

A
  1. Large number of small firms
  2. Homogeneous or identical product
  3. Very easy entry and exit
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8
Q

Under _____, the exact numbeer cannot be determined

A

Perfect Competition

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9
Q

One of the characteristics of a perfectly competitive market is its composition of many firms and buyers, which means there is a large number of independently-acting firms and buyers, both of which are being suffeciently small to be unable to influence the price od product ttransacted in the market.

A

Large number of small firms

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10
Q

Each firm or producer acts independently rather than coordinating decisions collectively.

A

Large number of small firms

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11
Q

In a perfectly competitive market, the products offered by the competing firms are ___ not inly in physical attributes but are also refarded as identical by buyers who have no preference between the products of various producers.

A

Homogeneous or identical product

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12
Q

All firms produce a standarized or ___ products.

A

homogeneous

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13
Q

Those who buy the products cannot distinguish what one seller offers from what another seller offers.

A

Homogeneous or identical product

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14
Q

This means that there are no barriers to entry of new sellers or impediments to the exit of existing sellers.

A

Very easy entry and exit

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15
Q

New firms do not have barrirs to entri while existing firms can readily leave the market without difficulty.

A

Veyr easy entry and exit

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16
Q

In the real world, however, no market exactly fits the 3 assumptions of perfect competition. TRUE OR FALSE

A

TRUE

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17
Q

The perfectly competitive market structure is only a ______ but some actual markets do approximate the model fairly closely.

A

theoretical or ideal model

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18
Q

Typical example of perfect competition is the ___

A

Agriculture sector

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19
Q

The perfect competitior faces a _____, or ____, demand curve.

A

horizontal or perfectly elastic

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20
Q

The _____ is the point at which supply and demand curves cross

A

market price

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21
Q

As a perfect competitor, you are a price _____, not a price _____.

A

taker
maker

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22
Q

. The ____ is where market demand is equal to market supply.

A

market price

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23
Q

_____ is very good for consumers because they can buy at cost.

A

Perfect competition

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24
Q

When the economy is perfectly competitive, the act of competing means that not everyone can have everything he desires, as one loses out to the competition.

A

Pareto optimality and efficiency

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25
Q

The concept of________ comes to play to settle this inefficiency

A

Pareto optimality

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26
Q

Named after ______ , an Italian economist who specialized in resource and income allocation, the concept states that an economy optimal or efficient when no further changes in the economy can make one individual better off without making someone else worse off

A

Vilfredo Pareto

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27
Q

________ is an allocative efficiency which occurs when the value that consumers place on goods or service equals the cost of the factor resourced utilized in the production.

A

Pareto optimality

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28
Q

Different sets of resource allocation exist so when a change in the initial allocation that makes one individual better off while not making another worse off. This is called a __________.

A

Pareto improvement

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29
Q

Monopolistic competition is a type of market structure characterized by 3

A
  1. Many small firms
  2. differentiated products
  3. easy market entry and exit
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30
Q

________ is formed by high number of firms producing similar goods that can be seen as unique due to differentiation, this market structure allow prices to go higher than marginal costs.

A

monopolistic competition

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31
Q

This means that each producer will be considered as a ________ but the whole market is considered competitive because the degree of differentiation still considers the possibility of having substitution effect.

A

monopoly

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32
Q

Monopolistically competitive market is comprised of a large number of independently-acting firms and buyers

A

many small sellers

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33
Q

_______ is the process of creating real or apparent differences between goods and services sold in the market

A

Product differentiation

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34
Q

The products offered by competing firms under a monopolistically competitive market are differentiated from each other in one or more respects. In fact, this is the key feature of monopolistic competition.

A

Differentiated product

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35
Q

A ________ has close, but not perfect, substitutes.

A

differentiated product

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36
Q

The importance of this viewpoint, therefore, is that consumers are willing to pay a slightly high price for Don Pedro’s seafood.

A

Product differentiation

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37
Q

_________, rivalry centers on non- price factors in addition to price competition.

A

monopolistic competition

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38
Q

_________, a firm in this type of market structure competes using marketing strategies like advertising, packaging, product development and innovation, better quality, and better service rather than simply lowering price.

A

non-price competition

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39
Q

___________ is an important characteristic of monopolistic competition that distinguishes it from perfect competition and monopoly.

A

Non-price

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40
Q

The most common form of non-price competition is _______.

A

advertising

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41
Q

In a _________, there are no barriers to entry preventing new firms entering the market or obstacles in the way of existing firms leaving the market.

A

monopolistically competitive market

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42
Q

unlike a _____, firms in a ________ face low barriers to entry.

A

monopoly
monopolistically competitive market

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43
Q

The number of firms operating in such a market is large but each firm has a small market share and firms have only a limited ability to influence prices.

A

monopolistically competitive market

44
Q

______ is one key to get sales back

A

Marketing promotion

45
Q

The demand curve of a firm in monopolistic competition market structure is _______ sloping because of the _______ of customers for the features of the differentiated product.

A

downward
preference

46
Q

This type of curve is based on the notion that the firm can change its price without losing all of its business because buyers do not see any perfect substitute.

A

monopolistic competitor

47
Q

A monopolistic competitor, in the short run, is like a ____ because it is the only producer of its unique product.

A

monopolist

48
Q

______ refers to a market situation where there is only one seller or producer supplying unique goods and services

A

Monopoly

49
Q

It is a single seller that has a complete control over a specific industry

A

Monopoly

50
Q

Monopoly comes from the Greek word “____” which means __ and “___” which means ___

A

mono - one
polist - seller

51
Q

Under ____, sellers are mostly firms offering water or electricity products and services, or other public utilities.

A

monopoly market

52
Q

____ is the opposite extreme of perfect competition. Under monopoly, the consumer has only two choices-either buying the monopolist’s product or none at all.

A

Monopoly

53
Q

Monopoly is a market structure characterized by 3 characteristics

A
  1. a single seller or producer
  2. a unique product or service
  3. impossible entry into the market
54
Q

meralco is an example of ____

A

monopoly

55
Q

A monopoly market is comprised of a single supplier selling to a multitude of small, independently-acting buyers.

A

single seller or producer

56
Q

A ____means that there are no close substitutes for the monopolist’s product.

A

unique product

57
Q

Barriers to entry are so severe in a monopoly so that it is impossible for new firms to enter the market.

A

Impossible entry

58
Q

In addition, there is no need for extensive advertising or sales promotion depending on the good or the service of the ___.

A

monopoly

59
Q

____ is the first of three types of Imperfect competition

A

Monopoly

60
Q

A ______ exists when there is great scope for economies of scale to be exploited over a very large range of output

A

natural monopoly

61
Q

A ______ therefore is a situation where economies of scale are so significant that costs are only minimized when the entire output of an industry is supplied by a single producer so that supply costs are lower under monopoly than under conditions of perfect competition and oligopoly.

A

natural monopoly

62
Q

______ tend to be associated with industries where there is a high ratio of fixed to variable costs

A

Natural monopoly

63
Q

The _______ industry has, in the past. been considered to be a natural monopoly (especially during the time when the industry has not yet been deregulated by the Philippine government)

A

telecommunications

64
Q

______ are price makers yet they are still subject to the law of demand

A

Monopolists

65
Q

In a competitive market, production rises to level where marginal costs is ____ marginal revenue. In a monopoly, production rises to a level where profit per unit is ____

A

equal
maximized

66
Q

_______ a market dominated by a few large producers or sellers of a homogeneous or differentiated product.

A

Oligopoly

67
Q

Because of their ‘fewness’, _____have considerable control over their prices, but each must consider the possible reaction of rivals to its own pricing, output, and advertising decisions.

A

oligopolists

68
Q

oligopoly is characterized by 3 characteristics

A
  1. few sellers
  2. either a homogeneous or a differentiated product
  3. difficult market entry
69
Q

Under oligopoly, the bulk of market supply is in the hands of a relatively few large firms who sell their products to many small buyers

A

Few sellers

70
Q

an ______ is a consequence of mutual interdependence

A

oligopoly

71
Q

It is a condition in which an action of one firm may cause a reaction from other competing firms in the industry.

A

Oligopoly

72
Q

In an oligopolistic market, the products offered by suppliers may be identical, or more commonly differentiated from each other in one or more respects.

A

Homogenous or differentiated products

73
Q

Similar to monopoly, there are formidable barriers to entry which make it very difficult for new firms to enter and compete in the market.

A

difficult entry

74
Q

Oligopoly exhibits 4 features

A
  1. Product Branding
  2. Entry Barriers
  3. Interdependent decision making
  4. Non-price competition
75
Q

Each firm in the market is selling a branded (differentiated) product

A

Product Branding

76
Q

_____means that firms must take into account likely reactions of their rivals to any change in price, output or forms of non-price competition.

A

Interdependence decision making

77
Q

Significant entry barriers into the market prevent the dilution of competition in the long run which maintains supernormal profits for the dominant firms.

A

entry barriers

78
Q

________ is a consistent feature of the competitive strategies of oligopolistic firms.

A

Non-price competition

79
Q

________competition involves advertising and marketing strategies to increase demand and develop brand loyalty among consumers.

A

Non-price competition

80
Q

Another type of oligopolistic behavior is _______. This is when one firm has a clear dominant position in the market and the firms with lower market shares follow the pricing changes prompted by the dominant firm.

A

price leadership

81
Q

_________ occurs when firms undertake actions that are likely to minimize a competitive response, e.g., avoiding price cutting or not attacking each other’s market.

A

Tacit collusion

82
Q

_____ is often explained by a desire to achieve joint-profit maximization within a market or prevent price and revenue instability in an industry.

A

Collusion

83
Q

_______represents an attempt by suppliers to control supply and fix price at a level close to the level we would expect from a monopoly.

A

Price fixing

84
Q

_______ is similar to the concept of monopoly that has one seller and many buyers

A

Monopsony

85
Q

For monopsony, there is only_____ buyer bur _ sellers. The buyer is called the ____

A

one -many
monopsonist

86
Q

________ occurs when there is a market power exercised by a firm when employing factors of production, having the monopsonist the control when negotiating prices.

A

Monopsony

87
Q

_____ is perceived as being “mandatory” for businesses that need to establish a cost-advantage or a significant leadership in product quality over their rivals.

A

Innovation

88
Q

CHAPTER SUMMARY

A

READY!!!

89
Q

______ is a classification system for the key traits of a market, including the number of firms, the similarity of the products they sell, and the ease of entry into and exit from the market structure.

A

Market structure

90
Q
A
91
Q

Perfect, or pure, competition is a market structure characterized by 3 characteristics

A
  1. a large number of small firms
  2. homogeneous product
  3. very easy entry or exit from the market.
92
Q

___________ states that an economy is _______ or efficient when no further changes in the economy can make one individual better off without making someone else worse off

A

Pareto Optimality

93
Q

Monopolistic competition is a type of market structure characterized by 3 characteristics

A
  1. many small firms
  2. differentiated products
  3. easy market entry and exit.
94
Q

Arguments for advertisements:
1. advertising is __________
2. advertising ______
3. advertising _________
4. advertising _____
5. advertising ________

A
  1. informative
  2. increases sales and permits economies of scale
  3. increases sales and contributes to economic growth
  4. supports the media
  5. increases competition and lowers prices
95
Q

Monopoly is the opposite extreme of perfect competition. It is a market structure characterized by 3 characteristics

A

(1) a single seller or producer
(2) a unique produce
(3) impossible entry into the market.

96
Q

A ___________ exists when there is great scope for economies of scale to be exploited over a very large range of output.

A

natural monopoly

97
Q

______ are price makers yet they are still subject to the law of demand.

A

Monopolists

98
Q

Monopolists are price makers yet they are still subject to the law of demand. Oligopoly is a market structure characterized by 3 charcteristics

A

(1) few sellers,
(2) either a homogeneous or a differentiated product
(3) difficult market entry.

99
Q

_____demand curve is a curve that explains why prices charged by competing oligopolists, once established tend to be stable.

A

Kinked

100
Q

An ____ therefore usually exhibits the following features: Product branding, Entry barriers, Interdependent decision-making and Non-price competition. . Non-price competition: Better quality of service, longer opening hours, extended warranties, discounts on product upgrades and contractual relationships with suppliers.

A

oligopoly

101
Q

_______ is when one firm has a clear dominant position in the market and the firms with lower market shares follow the pricing changes prompted by the dominant firm

A

Price leadership

102
Q

occurs where firms undertake actions that are likely to minimize a competitive response, e.g. avoiding price cutting or not attacking each other’s market.

A

Tacit collusion

103
Q

______ represents an attempt by suppliers to control supply and fix price at a level close to the level we would expect from a monopoly.

A

Price fixing

104
Q

___________: Enforcement problems, falling market demand and the successful entry of non-cartel firms into the industry.

A

Possible break-downs of cartels

105
Q

________is a form of buyer concentration, that is, a market situation in which a single buyer confronts many small suppliers.

A

Monopsony

106
Q

Important Developments of Market Structures: Increasingly most innovation is done by smaller firms; Innovation is now a continuous process; Innovation is not something left to chance; Demand innovation is becoming more important and Globalization.

A

Micro Economics (4 decks)

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