Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Econ 101 > Perfect Competition, Oligopolies, Monopolies > Flashcards

Perfect Competition, Oligopolies, Monopolies Flashcards

You may prefer our related Brainscape-certified flashcards:
Physics 101 flashcards Psychology 101 flashcards Chemistry 101 flashcards Biology 101 flashcards Organic Chemistry 101 flashcards Sociology 101 flashcards
1
Q

Market structures

A

Models of how the firms in a market interact with buyers to sell their output.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Market structures in decreasing order of competitveness

A

Perfectly competitive markets
Monopolistically competitive markets
Oligopolies
Monopolies

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Perfect Competion

A

Number of firms: many
Type of product: Identical
Ease of entry: High
Example: Growing wheat

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Monopolistic competition

A

Number of firms: Many
Type of product: Differentiated
Ease of entry: High
Example: Clothing stores

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Oligopoly

A

Number of firms: few
Type of product: Identical or differentiated
Ease of entry: Low
Examples: Manufacturing computers

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Monopoly

A

Number of firms: One
Type of product: Unique
Ease of entry: No entry
Example: Providing tap water

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Why does a perfect competitor face a horizontal demand curve

A

Exact substitutes are available in the market.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

How does a firm maximize profit in a perfectly competitive market

A

Producing at the output in which marginal revenue is equal to marginal cost
orThe profit-maximizing level of output is where the difference between total revenue and total cost is greatest

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Price takers

A

Buyers or sellers are unable to affect market price

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Summary: Profit, loss & breaking even

A

P > ATC: profit
P < ATC: loss
P = ATC: breaking even

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

when should a perfectly competitive firm shut down in the short run

A

When P < AVC

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Long-run competitive equilibrium

A

The situation in which the entry and exit of firms has resulted in the typical firm breaking even

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Why does a monopolistically competitive firm have a downward-sloping demand

A

The differentiated nature of products mean they are not perfect substitute for one another

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

How does a monopolistically competitive firm maximize profit

A

MC =MR

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What happens to profits in the long run

A

when TR > TC = economic profit
new firms enter market
entry of new firms eliminates profits

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

How barriers to explain the existence of oligopolies

A

Economies of scale
Ownership of a key input
Government-imposed barriers

17
Q

Economies of scale

A

The situation in which a firm’s long-run average cost falls as it increases the quantity of output

18
Q

The five competitive forces model

A 
1. Competition from existing firms
Threat from new entrants
Competition from substitute goods or services 
Bargaining power of buyers
Bargaining power of suppliers
19
Q

Monopoly

A

A market structure consisting of a firm that is sole seller of a good or service for which there is not a close substitute.

20
Q

Four main reasons monopolies arise

A

Government restrictions on entry
Control of a key resource
Network externalities
Natural monopoly

21
Q

How does a monopoly choose price and output

A

MC = MR determines quantity for monopolist
At this quantity the demand curve determines price and the ATC curve determines average cost.

Profit = (P-ATC)*Q

22
Q

How a firm can increase its through price discrimination

A

Charging different prices to different customers for the same good or service when the price differences are not due to differences in cost.

23
Q

Government restrictions on entry

A

Patents, copyrights and trademarks

Public franchise/enterprise: A firm that is the only legal provider of a good or service

24
Q

Control of key resource

A

De beers sought to control the supply of diamonds

25
Q

Network externalities

A

A situation in which the usefulness of a product increases with the number of consumers who use it.

26
Q

Natural monopoly

A

A situation in which the economies of scale are so large that one firm can supply the entire market at a lower average total cost than can two or more firms.

27
Q

When is price discrimination possible

A

Firms possess market power
Identifiable groups of consumers have different willingness to pay for the product.
Arbitrage of the product is not possible

Econ 101 (9 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions