Market Structures Flashcards
Perfect Competition
Market structure in which a large number of firms all produce the same product (no single seller controls supply or prices)
Commodity
Product that is the same no matter who produces or sells it, such as petroleum, notebook paper, or milk,
Barrier to Entry
Any factor that makes it difficult for a new firm to enter a market
Imperfect competition
Expenses a new business must pay before it can begin to produce and sell goods
Start-Up Costs
Expenses a new business must pay before it can begin to produce and sell goods
Monopoly
Market dominate by a single seller
Economy of Scale
Factors that cause a producer’s average cost per unit to fall as output rises
Natural Monopoly
Market that runs most efficiently when one large firm supplies all of the output
Government Monopoly
Monopoly created by the government
Patent
License that gives the inventor of a new product the exclusive right to sell it for a certain period of time
Franchise
Right to sell a good or service within an exclusive market
License
Government issued right to operate a business
Price discrimination
Division of customers into groups based on how much they will pay for a good
Market power
Ability of a company to change prices and output like a monopolist
Monopolistic Competition
Market structure in which many companies sell products that are similar but not identical
Differentiation
Making a product different from other similar products
Nonprice Competition
Way to attract customers through style, service, or location, but not a lower price
Oligopoly
Market structure in which a few large firms dominate a market
Price War
Series of competitive price cuts that lowers the market price below the cost of production
Collusion
Agreement among firms to divide the market, set prices, or limit production (illegal)
Price fixing
Agreement among firms to charge one price for the same good (illegal)
Cartel
Formal organization of producers that agree to coordinate prices and production
4 Types of Market Structures
Perfect Competition
Monopolies
Monopolistic Competition
Oligopolies
Money
Anything that serves as a medium of exchange, a unit of account, and a store of value
Medium of Exchange
Anything that is used to determine value during the exchange of goods and services
Barter
The direct exchange on one set of goods or services for another
Unit of Account
A means for comparing the values of goods and services
Store of Value
Something that keeps its value if it is stored rather than used
Currency
Coins and paper bills used as money
Commodity Money
Objects that have value in themselves and that are also used as money
Representative Money
Objects that have value because the holder can exchange them for something else of value
Fiat Money
Money that has value because the government has ordered that it is an acceptable means to pay debt
Bank
An institution for receiving, keeping, and lending money
National Bank
A bank chartered, or licensed, by the national government
Bank Run
Widespread panic in which great numbers of people try to redeem their paper money
Greenback
Paper currency issued during the Civil War
Gold Standard
A momentary system in which paper money and coins are equal to the value of a certain amount of gold
Federal Reserve System
The nation’s central banking system
Central Bank
Bank that can lend to other banks in times of needs
Member Bank
Bank that belongs to the Federal Reserve System
Federal Reserve Note
The national currency we use today in the United States
Great Depression
The severe economic decline that began in 1929 and lasted for more than a decade
Federal Deposit Insurance Corporation
The government agency that insures customer deposits if a bank fails
Money Supply
All the money available in the United States economy
Liquidity
The ability to be used as, or directly converted to, cash
Demand Deposit
The money in checking accounts
Money Market Mutual Fund
a fund that pools money from small savers to purchase short-term government and corporate securities
Fractional Reserve Banking
A banking system that keeps only a fraction of funds on hand and lends out the remainder
Default
Failure to pay back a loan
Mortgage
A specific type of loan that is used to buy real estate
Credit Card
A card entitling its holder to buy goods and services based on holder’s promise to pay for these goods and services
Interest
The price paid for the use of borrowed money
Principal
The amount of money barrowed
Debit Card
A card used to withdraw money
Creditor
Person or institution to whom money is owed
