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BASIC MICROECONOMICS > M5 > Flashcards

M5 Flashcards

1
Q

is any organization whereby buyers and sellers of goods are kept in close touch with each other.

A

MARKET

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2
Q

MARKET FOUR BASIC COMPONENTS

A
  • CONSUMERS
  • SELLERS
  • COMMODITY
  • PRICE
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3
Q

Individuals or groups who purchase goods or services.

A

CONSUMERS

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4
Q

Entities offering goods or services for sale.

A

SELLERS

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5
Q

The product or service being exchanged.

A

COMMODITY

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6
Q

The monetary value assigned to a commodity.

A

PRICE

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7
Q

is one of the most crucial aspects in microeconomics. Since every economic activity in the market is measured as per price, it is important to know the concepts and theories related to pricing under various market forms.

A

PRICE DETERMINATION

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8
Q

TYPES OF MARKET

A
  • PERFECT/PURE COMPETITION
  • MONOPOLY
  • MONOPOLISTIC
  • OLIGOPOLY
  • MONOPOLISTIC COMPETITION
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9
Q

Is a market structure characterized by a complete absence of rivalry among the individual firms. In practice, businessmen use the word competition as synonymous to rivalry

A

PERFECT COMPETITION

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10
Q

In theory,___ implies no rivalry among firms.

A

PERFECT COMPETITION

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11
Q

ASSUMPTIONS IN PERFECT COMPETITION

A
  • LARGE NUMBER OF SELLERS AND BUYERS
  • PRODUCT HOMOGENEITY
  • FREE ENTRY ANF EXIT OF FIRMS
  • PROFIT MAXIMIZATION
  • NO GOVERNMENT REGULATION
  • PERFECT MOBILITY OF FACTORS OF PRODUCTION
  • PEFECT KNOWLEDEGE
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12
Q

If your firm fulfills assumptions 1 to 5, then you are in a ___ market. A ___market requires numbers 6 and 7 assumptions to be fulfilled.

A
  • PURE COMPETITION
  • PERFECT COMPETITION
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13
Q

Firms in the perfect competition and pure competition environment are___. The prevailing market price dictates their products’ prices.

A

PRICE TAKERS

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14
Q

is said to exist when one firm is the sole producer or seller of a product which has no close substitutes.

A

MONOPOLY

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15
Q

No close substitutes for the product of that firm should be available.

A

MONOPOLY

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16
Q

MONOPOLY CONDITIONS

A
  • SINGLE PRODUCERS
  • NO COMPETITORS
  • MARKET ENTRY BARRIERS
  • PRICE MAKER
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17
Q

SOURCES OF MONOPOLY

A
  • LEGAL RESTRICTIONS
  • CAPITAL COST
  • NATURAL FACROT ENDOWMENT
  • TARIFFS AND QUOTAS
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18
Q

raises the price of goods imported
into the domestic economy

A

TARRIF

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19
Q

restricts the volume that can be imported.

A

QUOTA

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20
Q

is a theoretical market structure characterized by a high level of competition and several key features that create a highly efficient and competitive environment.

A

PURE COMPETITION

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21
Q

no single producer or consumer has the power to influence market prices significantly.

A

PURE COMPETITION

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22
Q

KEY CHARACTERISTICS OF PURE COMPETITION

A
  • MANY BUYERS AND SELLERS
  • HOMOGENOUS PRODUCTS
  • PERFECT INFORMATION
  • FREE ENTRY AND EXIT
  • PRICE TAKERS
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23
Q

ADVANTAGES OF PURE COMPETITION

A
  • ALLOCATIVE EFFICIENCY
  • PRODUCTIVE EFFICIENCY
  • CONSUMER CHOICE
24
Q

LIMITATIONS OF PURE COMPETITION

A
  • UNREALISTIC ASSUMPTION
  • LACK OF INNOVATION
25
Q

provides a useful theoretical benchmark for understanding market efficiency and the dynamics of supply and demand.

A

PURE COMPETITION

26
Q

is a market structure characterized by a blend of competitive and monopolistic elements.

A

MONOPOLISTIC COMPETITION

27
Q

It represents a common market scenario where many firms compete, but each firm offers a slightly differentiated product.

A

MONOPOLISTIC COMPETITION

28
Q

KEY CHARACTERISTICS OF MONOPOLISTIC COMPETITION

A
  • MANY FIRMS
  • PRODUCT DIFFERENTIATION
  • FREE ENTRY AND EXIT
  • SOME CONTROL OVER PRICES
  • NON-PRICE COMPETITION
29
Q

ADVANTAGES OF MONOPOLISTIC COMPETITION

A
  • PRODUCT VARIETY
  • INNOVATION AND DIFFERENTIATION
  • CONSUMER CHOICE
30
Q

LIMITATIONS OF MONOPOLISTIC COMPETITION

A
  • EXCESS CAPACITY
  • HIGHER PRICES
  • INEFFICIENVY
31
Q

represents a common real-world market structure where firms differentiate their products to gain a competitive edge.

A

MONOPOLISTIC COMPETITION

32
Q

While it offers benefits such as product variety and innovation, it also comes with drawbacks like excess capacity and higher prices.

A

MONOPOLISTIC COMPETITION

33
Q

helps analyze the dynamics of markets where firms have some degree of pricing power and differentiation, providing insights into consumer choices and market efficiency.

A

MONOPOLISTIC COMPETITION

34
Q

Is a market structure characterized by a small number of large firms that dominate the market.

A

OLIGOPOLY

35
Q

These firms have significant market power, and their decisions are interdependent, meaning the actions of one firm can directly affect the others.

A

OLIGOPOLY

36
Q

lies between monopoly and competitive markets and can lead to various competitive and cooperative outcomes.

A

OLIGOPOLY

37
Q

KEY CHARACTERISTICS OF OLIGOPOLY

A
  • FEW LARGE FIRMS
  • INTERDEPENDENCE
  • BARRIERS TO ENTRY
  • PRODUCT DIFFERENTIATION
  • NON-PRICE COMPETITION
  • PRICE RIGIDITY
38
Q

MARKET BEHAVIOR AND EQUILIBRIUM OF OLIGOPOLY

A
  • COLLUSION
  • KINKED DEMAND CURVE MODEL
  • GAME THEORY
  • PRICE LEADERSHIP
39
Q

Firms may engage in ____,
either explicitly (forming a cartel) or implicitly (informal agreements) to set prices and output levels.

A

COLLUSION

40
Q

leads to higher prices and reduced output, similar to monopoly behavior.

A

COLLUSION

41
Q

This model suggests that firms
face a demand curve that is kinked at the current price level. Firms expect competitors to follow price decreases but not price increases.

A

KINKED DEMAND CURVE MODEL

42
Q

This leads to price rigidity as firms avoid changing prices due to the potential for increased competition if prices are raised.

A

KINKED DEMAND CURVE MODEL

43
Q

analyzes strategic interactions among firms, including strategies like tit-for-tat or dominant strategies.

A

GAME THEORY

44
Q

helps understand decision-making processes and outcomes in oligopolistic markets.

A

GAME THEORY

45
Q

In some oligopolies, one firm,
often the largest or most dominant, sets
the price, and other firms follow.

A

PRICE LEADERSHIP

46
Q

This leads to a coordinated
pricing strategy without formal collusion.

A

PRICE LEADERSHIP

47
Q

ADVANTAGES OF OLIGOPOLY

A
  • ECONOMIES OF SCALE
  • INNOVATION AND INVESTMENT
  • PRODUCT VARIETY
48
Q

Large firms in an oligopoly can
achieve ___, reducing average costs and benefiting from lower production costs.

A

ECONOMIES OF SCALE

49
Q

This can lead to lower prices for consumers if firms pass on cost

A

ECONOMIES OF SCALE

50
Q

Firms with significant market
power and profits can invest in research

A

INNOVATION AND INVESTMENT

51
Q

This can lead to technological
advancements and improved products

A

INNOVATION AND INVESTMENT

52
Q

Differentiated products in an
oligopoly can offer consumers a range of
choices.

A

PRODUCT VARIETY

53
Q

LIMITATIONS OF OLIGOPOLY

A
  • HIGHER PRICES
  • REDUCED OUTPUT
  • RISK OF COLLUSION
54
Q

represents a market structure where a few large firms exert significant control over market outcomes, leading to various competitive and cooperative behaviors.

A

OLIGOPOLY

55
Q

While it can offer benefits such as economies of scale and innovation, it also poses challenges like higher prices and reduced competition.

A

OLIGOPOLY

56
Q

helps analyze the strategic interactions and market dynamics in industries where firms have considerable market power.

A

OLIGOPOLY

BASIC MICROECONOMICS (7 decks)

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