market structures

Question 1

perfect competition def

Answer 1

The opposite of monopoly; the competition is at its greatest level.

Question 2

price taker

Answer 2

a company that must accept the prevailing prices in the market of its products, its own transactions being unable to affect the market price.

Question 3

barrier to entry

Answer 3

The existence of high start-up costs or other obstacles that prevent new competitors from easily entering an industry or area of business.

Question 4

break even price

Answer 4

The amount of money for which an asset must be sold to cover the costs of acquiring and owning it.

Question 5

shut down price

Answer 5

The price of a product below which it is cheaper for a company not to make the product than to continue to sell it.

Question 6

normal profit

Answer 6

the difference between a firm’s total revenue and total cost is equal to zero.

Question 7

economic profit

Answer 7

the monetary costs and opportunity costs a firm pays and the revenue a firm receives

Question 8

productive efficiency

Answer 8

concerned with producing goods and services with the optimal combination of inputs to produce maximum output for the minimum cost. To be productively efficient means the economy must be producing on its production possibility frontier.

Question 9

allocative efficiency

Answer 9

Allocative efficiency is a state of the economy in which production represents consumer preferences; in particular, every good or service is produced up to the point where the last unit provides a marginal benefit to consumers equal to the marginal cost of producing.

Question 10

monopoly def

Answer 10

a person or business that has a monopoly.

Question 11

characteristics of a monopoly

Answer 11

• only one producer
• high barrier to entry
• very high market power
• no subsidies
• maximize profit in the short run
• D=P=AR

Question 12

why AR not equal MR

Answer 12

because an increase in production for a monopolist has 2 opposite effect on total revenue: quantity effect and price effect

Question 13

price discrimination

Answer 13

the action of selling the same product at different prices to different buyers, in order to maximize sales and profits.

Question 14

disadvantages of a monopoly

Answer 14

• high price
• sell lower quantity
• productive and allocative inefficient
• diseconomies of scale
• low quality

Question 15

natural monopolies

Answer 15

A natural monopoly is a monopoly that exists because the cost of producing the product (i.e., a good or a service) is lower due to economies of scale if there is just a single producer than if there are several competing producers.

Question 16

preventing monopoly

Answer 16

• breaking in smaller companies
• public ownership
• price regulation

Question 17

quantity effect

Answer 17

In economics, the Total Revenue Test is a means for determining whether demand is elastic or inelastic. If an increase in price causes an increase in total revenue, then demand can be said to be inelastic, since the increase in price does not have a large impacton quantity demanded.

Question 18

price effect

Answer 18

The impact that a change in value has on the consumer demand for a product or service in the market. The price effect can also refer to the impact that an event has on something’s price. The price effect consists of the substitution effect and the income effect.

Question 19

perfect price discrimination

Answer 19

when the seller will charge each customer the maximum price that he or she is willing to pay.

Question 20

antitrust policies

Answer 20

consisting of laws to protect trade and commerce from unlawful restraints and monopolies or unfair business practices.

Question 21

characteristic of monopolistic competition

Answer 21

• many producers competing
• different product
• free entry/exit

Question 22

name the four types of market structures

Answer 22

• monopoly
• monopolistic competition
• oligopoly
• perfect competion

Question 23

monopolistic competition vs perfect competition

Answer 23

• distinct product

Question 24

product differentiation

Answer 24

In economics and marketing, product differentiation (or simply differentiation) is the process of distinguishing a product or service from others, to make it more attractive to a particular target market. This involves differentiating it from competitors’ products as well as a firm’s own products.

Question 25

consequences of product differentiation

Answer 25

• competition among sellers
• benefit of diversity for consumers
• style or type
• product development
• location
• quality
• customers serve
• advertising
• branding

Question 26

non price competition

Answer 26

advertising and marketing strategies to increase demand and develop brand loyalty

Question 27

advertising

Answer 27

strategy to promote or sell something

Question 28

branding

Answer 28

creating a symbol of identification for a product

Question 29

excess capacity problem

Answer 29

a firm can produce 100 but the market is asking for 50, there is a excess capacity problem where the firm produce less than what is achievable

Question 30

HHI index

Answer 30

measures the quantity of firms in a market

Question 31

duopoly

Answer 31

when two suppliers dominate a market

Question 32

collusion

Answer 32

is a non-competitive agreement between rivals that attempts to disrupt the market’s equilibrium.

Question 33

cartel

Answer 33

A group of producers in an industry that join together to regulate supply (or fix prices)

Question 34

incentive to cheat

Answer 34

when a company meh…agrees to disagree and decides to be sneaky passing through an agreement.

Question 35

non-cooperative behavior

Answer 35

take decisions idependently

Question 36

game theory

Answer 36

the theory of social situations,

Question 37

payoff

Answer 37

Benefits received

Question 38

payoff matrix

Answer 38

A matrix which gives the possible outcome of a two-person zero-sum game when player A has possible moves and player B moves. The analysis of the matrix in order to determine optimal strategies is the aim of game theory.

Question 39

strategy

Answer 39

a plan of action or policy designed to achieve a major or overall aim.

Question 40

dominant strategy

Answer 40

dominant strategy exists for one player in a game, that player will play that strategy in each of the game’s Nash equilibria. If both players have a strictly dominant strategy, the game has only one unique Nash equilibrium.

Question 41

nash equilibrium

Answer 41

where the optimal outcome of a game is one where no player has an incentive to deviate from his or her chosen strategy after considering an opponent’s choice.

Question 42

tit for tat strategy

Answer 42

When faced with a prisoner’s dilemma-like scenario, an individual will cooperate when the other member has an immediate history of cooperating and will default when the counterparty previously defaulted.

Question 43

tacit collusion

Answer 43

occurs where firms undergo actions that are likely to minimise a response from another firm, e.g. avoiding the opportunity to price cut an opposition. Put another way, two firms agree to play a certain strategy without explicitly saying so.

Question 44

overt collusion

Answer 44

A formal, usually secret, collusion agreement among competing firms (mostly oligopolistic firms) in an industry designed to control the market, raise the market price, and otherwise act like a monopoly.

Question 45

kinked demand curve

Answer 45

Economic theory regarding oligopoly and monopolistic competition. When it was created, the idea fundamentally challenged classical economic tenets such as efficient markets and rapidly changing prices, ideas that underlie basic supply and demand models.

Question 46

interdependent firms

Answer 46

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