Market Structures Flashcards
Barrier to Entry
- Obstacles that limit the ability of new companies to enter the market
- allow existing firms to earn economic profits in the long run
Cartel
A formal organization of sellers or producers that agree to act together to set prices and limit output
Deregulation
- Reduction of government oversight and control of business
- Results in lower prices because there is more competition
- May lead to fewer protections for consumers
Market Structure
Economic model that allows economists to examine competition among businesses in the same industry
Monopolistic Competition
- Aka Polyopolies
- Many sellers with similar goods/services
- most markets fall into this category
- consumers benefit from competition
Monopoly
- Producer has no competition
- occurs when there is one seller of a product that has no close substitute
- can describe the market structure an/or the actual business
- 4 types (natural, government, technological, and geographic)
Oligopoly
- Few sellers/similar product
- large firms (typically manufacturing)
- consumer choices are limited
Predatory Pricing
setting prices below cost for a time to drive smaller competiors out of the market
(like kum and go)
Price Fixing
the maintaining of prices at a certain level by agreement between competing sellers. ( occurs when businesses work together to set the prices of something products)
Product Differentiation
is the attempt to distinguish a product from similar products
Public Disclosure
Which requires businesses to reveal product information to consumers (usually not a good thing)
Regulation
- Controlling behavior through rules/laws
- Promotes competition by prohibiting unfair business prices (price fixing, market allocation, and predatory pricing)
- Protects consumers
- Public disclosures
- protection agencies
- food and drug administration
- environmental protection agency
- consumer product safety commision
Standardized Product
A product that consumers consider identical in all essential features to other products in the same market
What are the characteristics of imperfect competition?
-occurs in the markets that have few sellers or products that are not standardized
-producers are hindered by barriers to entry in the market structure
(could not find characteristics but this is the definition in notebook)
What are the characteristics of perfect competition?
- numerous buyers and sellers
- standerdized products
- freedom to enter and exit the market
- independent buyers and sellers
- well informed buyers and sellers
How are monopolist able to control prices?
only one seller and there is no competition
What are barriers to entry?
- Something that hinders a business from entering a market
- like regulations such as the inability to create a moving business without a license
What are examples of standardized products?
Like pencils, they all have lead in them and they are used to write with
Define the four types of monopolies? Provide an example of each.
- Natural (a water company)
- Government (the postal service)
- Technological (Polaroid)
- Geographic (professional sports)
What are some characteristics and examples of monopolistic competition?
Characteristics -many sellers and b uyers -similar but different products -limited control orf prices -feedom to enter/exit market Examples -fast food restraunts (burger king, mcdonalds, and sonic) -clothing stores (cato, maurices)
What are the characteristics of monopolies?
- one seller
- restricted and regualted market
- control of prices
What is an example of a pure monopoly that is rare?
cartel
What are some examples of barrier to entry?
- Legal: patents, copyrights, government regulation
- control of resources
- economies to scale
- market advantages: brand loyalty, marketing access
What are some characteristics of oligopoly?
- few sellers and many buyers
- standardized of differentiated products
- control of price
- little freedom to enter and exit the market
