Market Structures Flashcards
means that a person knows the price of a commodity being charged in the markets.
Perfect knowledge
There is large number of sellers and buyers of the commodity each too small to affect the price of the commodity;
The outputs of all firms in the market are homogeneous
There is perfect mobility of resources.
Pure Competition
The demand curve of pure competition is still ____________.
downward sloping
Referring to a time period in which a firm can vary its output but does not have time to change its plant size. The number of firms in an industry is fixed because new
The Short Run
are a pure surplus or an excess of total receipts over all costs of production incurred by the firm.
ECONOMIC PROFIT
the additional cost incurred when additional units of products are produced.
Marginal Cost
the additional revenue obtained by putting additional revenue obtained by putting additional units of output in the market.
Marginal revenue
Demand under ATC=
Loss
Demand over ATC =
Profit
Refers to the price that would force the producer to stop production because of losses.
The Shutdown Price
When enough firms go out of business, industry supply declines, which pushes price up.
Long Run: Breakeven
Refers to the situation toward which the market price and output and the short-run equilibrium price and output tend in a period of time long enough
Price and Output in the Long-run
is a market where one firm (or manufacturer) is the sole supplier of certain goods or services. This firm faces no competition due to which it can set its own prices, thereby exercising full control over the market.
monopoly
Characteristics of Monopoly
- Single Seller
- No Close Substitutes
- Control Over Price
- No Entry
- No difference between Firm and Industry
Demand Curve
under Monopoly
is the ________
market demand curve
is a pricing strategy used by businesses to charge different prices for the same product or service based on each customer’s willingness to pay.
Price discrimination
when a single privately-owned company controls a particular market niche to the extent that they wield significant power and influence over the market.
Private Monopoly
is a single seller in a market or sector with high barriers to entry such as significant startup costs whose product has no substitutes.
Pure Monopoly
occurs when a single company can provide goods or services to the entire market at a lower cost than two or more competing firms.
Natural Monopoly
It happens when the government assumes exclusive control over an industry or service to provide citizens with essential goods and services that are necessary for the public good.
Public Monopolies
the “founding father” of the theory of monopolistic competition is
Edward Hastings Chamberlin
Refers to the competitive environment in which buyers and sellers operate.
Market Structure
a market organization in which there is a relatively large number of small firms, producing homogeneous products with close substitutes.
Monopolistic Competition
Does not require the presence of thousands or millions of firms or producers but only a fairly large number.
Monopolistic Competition
Does not require the presence of thousands or millions of firms or producers but only a fairly large number.
Monopolistic Competition
Requires hundreds, thousands, or even millions of producers.
Pure Competition
It has zero economic profit in the long run or for other term
Normal Profit
when producers turn out variations or close substitutes of a oftiven product.
it makes the products sold by one seller somewhat different from the product sold by another.
Product DIFFERENTIATION
differences can exist thru effective use of advertising, packaging, trademarks & brand names.
IMAGINARY
can exist when functional features, material, design are important.
REAL
Losses will be minimized at the point where
marginal cost = marginal
revenue.
In the short-run, firms in monopolistic competition determine their price and output levels based on their marginal revenue and marginal cost.
Short-run Equilibrium
SLOPE OF THE DEMAND CURVE OF PERFECT COMPETITION
Horizontal straight line
AR=MR
SLOPE OF THE DEMAND CURVE OF MONOPOLISTIC COMPETITION
Downward slopping flatter
AR>MR
an example of collusion in its most complete form which purpose is monopolistic maximization of industry profits by the few firms in the industry
Centralized Cartel
a formal organization of producers within a given industry
Cartel
rigid or “sticky” prices common in oligopoly; particularly sticky downward since firms in oligopoly normally do not lower their prices.
Kinked Demand Curve
a secret agreement between two or more persons or institutions to achieve certain objectives among the industry’s firms
Collusion
is a market structure characterized by a small number of firms and a great deal of interdependence among them.
Oligopoly
This is the market structure that lies between perfect competition and monopoly.
Oligopoly
exists in industries with nonhomogeneous products, like the car and appliance industries.
Differentiated oligopoly
exists in industries with nonhomogeneous products, like the car and appliance industries.
Differentiated oligopoly
exists when firms produce identical products. It’s common in some capital goods industries like cement and oil.
Pure oligopoly
is condition in which the competition prevails among the group of sellers in the industry.
SELF INTEREST
is a situation in which firms under the market create either collusion or cartel.
COOPERATION
occurs when firms in the market agree to coordinate their pricing decisions to some degree, but not to the point of acting as a single monopoly.
Imperfect Collusion
occurs when all firms in the market agree to act as a single monopoly. This means that they will all charge the same price, which will be the monopoly price.
Perfect Collusion
Made up mostly of tacit informal arrangements under which the firms of an industry seek to establish prices and outputs.
Imperfect Collusion
In the The Kinked Demand Curve, If the firm _________ its price,it operates on the _________ part of the demand curve. If the price __________ it will operates on the ___________ side of demand curve.
Increases-elastic, Decreases-Inelastic
A well known theory designed to explain the rigidly of prices in oligopolistic markets was advanced by
Paul Sweezy
