Unit Two Review Flashcards
Four conditions for perfect competition
Buyers and sellers participate in market
Sellers offer identical product
Buyers and sellers well informed about products
Sellers able to enter and exit market freely
The simplest market structure is known as
Perfect competition
What are the factors that make it difficult for new firms to enter the market
Start up costs
Technology
Economies of scale
Factors that cause a producers avg cost to drop as production rises, so more produce, less cost
Ex mass production
How can economies of scale become anatural monopoly
So because the economy of scale can produce more for less, they can supply all the output like in a natural monopoly
Natural monopoly
A market that runs most efficiently when one large firm supplies all of the output
What can destroy a natural monopoly
New technology can make small companies as efficient as large ones
Price discrimination
Dividing customers into groups depending on how much that will pay for a good
What happens when monopolistic firms start earning profits well above costs
Competition would take customers away
New firms enter with cheaper slightly different products
All take profit away
Zoning laws
Law that separates areas for residency or business, which could keep sole proprietors form working out of home
Different types of liability
Unlimited personal liability- sole
Responsibility (sole
Proprietors)
Limited liability- partnerships limited form other partners mistakes
Unlimited liability- in partnership one is fully liable and the other isn’t
Who has limited liability for a corporation debt
Stockholders
Horizontal merger
Join two or more firms competing in same market with same good and service
Vertical merger
Join two or more firms involved I. Different stages of producing the same good or service. Ex all stages of production, wheat farm to the pizza place
Why have franchises become popular over the years
Allow owners degree of control and benefit from support of parent company
Why have minorities historically earned lower wages than white counterparts
Whites normally have access to more education and work experience, so more human capital and higher wages
Natural monopoly characteristics
One firm
No variety
Complete barriers to entry
Complete control of prices
How does price discrimination divide people into groups
Customers not willing to pay regular price get discounts
Customers who need the good get a higher price
Discount airlines for weeks in advance
Non price competition
Attract customers through physical characteristics, location, service level, and advertisement but not price
What happens during deregulation
Takes away government control, government actions allow/force firms to compete in markets by eliminating barriers to entry and price controls
Relationship between government, monopoly, and patent
Government can give companies monopoly power through a patent with exclusive right to sell their product for certain amount of time. Encourages research and development
How are wages for a job determined
Higher education increases wage
Higher skill set increases wage
Productivity
What happens to job opportunities of low paying jobs if minimum wage goes up
If minimum wage goes up, there is a decrease in quantity demanded, so fewer jobs and higher unemployment rate
Describe what is meant by a market structure (4 different types)
Perfect competition
Monopolistic competition
Monopoly
Oligopoly
When do monopolies exist
When there is a single seller in the market and barriers prevent firms form entering a market
Explain the future of the labor market in the United States
Decline in labor movement
Decline in unions
Loss of traditional job roles
What is the purpose of labor union a
Gain control over working conditions and Rights by forming a union
Teacher skill level
Professional
Bus boy skill level
Unskilled
Forklift operator skill level
Semi skilled
Nurse skill level
Professional
Hair stylist or barber skill level
Skilled
Fry guy skill level
Unskilled
Describe a cartel
A formal organization of producers that agree to coordinate prices and production
Examples of non profit organizations
Museums, public schools, Red Cross, hospitals, churches
