Week 6: cost curves Flashcards
1
Q
Perfect competition
A
- large number of small buyers and sellers
- a standard (substitutable) product
- easy entry and exit from the industry
- perfect information for buyers and sellers (awareness of prices and quality of goods)
ex. farms
2
Q
Monopolistic competition
A
- many buyers and sellers
- slightly different products
- easy entry and exit
ex. McDonalds and Wendys (subsitiable)
3
Q
Oligopoly
A
a few businesses (protected by entry barriers) provide standard or similar products
ex. bell and rogers
4
Q
Monopoly
A
a single business (protected by entry barriers) provides a product with no close substitutes
ex. healthcare
5
Q
6 Barriers to Entry
A
- increasing returns to scale
- market experience
- restricted ownership of resources
- legal obstacles (such as patents)
- market abuses (such as predatory pricing)
- advertising (which is most common in oligopolies)
6
Q
Predatory pricing
A
the illegal act of setting prices low to attempt to eliminate the competition
7
Q
Market power
A
- is a business’s ability to affect the price it charges
- varies with market structure, such that monopolists have the most and perfect competitors have the least
8
Q
Business’s demand curve
A
horizontal
9
Q
Market demand curve
A
increasing while price decreases (X)
10
Q
Revenues for a Perfect Competitor
A
D = AR = MR = P
