Section 4 - Market Structures Flashcards

1
Q

Perfect competition

A

A description of how a market would work if certain conditions were satisfied

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2
Q

Perfect information for consumers

A

Perfect knowledge of all goods and prices in a market

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3
Q

Perfect information for producers

A

Perfect knowledge of the market and production methods

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4
Q

Allocative efficiency

A

When a good’s price is equal to what consumers want to pay for it

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5
Q

Productive efficiency

A

Ensuring the costs of production are as low as they can be

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6
Q

X-efficiency

A

Measures how successfully a firm keeps its costs down.

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7
Q

X-inefficiency

A

Production costs could be reduced at that level of production

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8
Q

Dynamic efficiency

A

Improving efficiency in the long term; refers to the willingness and eagerness of firms

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9
Q

Internal market

A

Where different parts of the same organisation compete against each other

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10
Q

Barrier to entry

A

Any potential difficulty or expense a firm might face if it wants to enter a market

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11
Q

Incumbent firms

A

Firms that are already in the market

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12
Q

Predatory pricing

A

Incumbent firms lowering prices to a level that drive entrants out of business

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13
Q

Monopoly (pure monopoly)

A

A market with only one firm in it

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14
Q

Monopsony

A

A situation when a single buyer dominates a market

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15
Q

Price discrimination

A

When a seller charges different prices to different customers for exactly the same product

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16
Q

Consumer surplus

A

The difference between the actual selling price of a product and the price a consumer would have been willing to pay

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17
Q

First degree price discrimination

A

Where each individual customer is charged the maximum they would be willing to pay

18
Q

Second Degree price discrimination

A

Often used in wholesale markets, where lower prices are charged to people who purchase larger quantities

19
Q

Third degree price discrimination

A

When the firm charges different prices for the same product to different segments of the market

20
Q

Concentrated markets

A

Industries that are dominated by just a few companies (even though there may be many firms in that industry overall)

21
Q

Oligopoly ( market structure)

A

A market that is dominated by just a few firms, has high barriers to entry, and offers differentiated products

22
Q

Oligopoly (conduct of firms)

A

A market in which firms are interdependent and use competitive or collusive strategies to make this interdependence work to their advantage

23
Q

Competitive behaviour

A

When the various firms don’t cooperate, but compete with each other

24
Q

Collusive behaviour

A

When the various firms cooperate with each other especially over what prices are charged

25
Q

Collusive oligopolies

A

Lead to higher prices and restricted output, and allocative and productive inefficiency

26
Q

Output quotas

A

The level of output each of the firms will produce

27
Q

Interdependency of firms

A

Each firm is affected by the behaviour of the others

28
Q

Game theory

A

Two or more ‘players’ ( people, firms etc.) are each trying to further their own interests. The fate depends on their own and others decisions

29
Q

Prisoner’s dilemma

A

How interdependent firms might act in an oligopolistic market.

30
Q

First- mover advantage

A

a firm’s ability to be better off than its competitors as a result of being first to market in a new product category

31
Q

Payoff matrix

A

The potential profits and losses that each firm could make in the various possible scenarios

32
Q

Monopolistic competition (imperfect competition)

A

Some product differentiation and very low barriers to entry

33
Q

Contestability

A

How open a market is to new competitors, even if currently there’s little actual competition

33
Q

Contestable markets

A

Barriers to entry and exit are low and supernormal profits can be made by new firms ( in short run )

34
Q

Patents

A

Give a firm legal protection against other firms copying its products or production methods.

35
Q

Sunk costs

A

When costs can’t be recovered when a firm leaves an industry

36
Q

Hit and run tactics

A

This means entering a market while supernormal profits can be made and leaving once prices fall down to normal-profit levels

37
Q

Technological change

A

The invention of new products and services, or new production methods

38
Q

Invention

A

Making something new

39
Q

Innovation

A

Changing a product or process that already exists

40
Q

Creative destruction

A

the process of economic change that results from the introduction of new technologies or products that render existing ones obsolete