7.1-7.3 - Market Structures

Match the following terms with the correct defintion.

• Perfect competition

• Name given to any of the three market structures that lacks one or more of the conditions required for perfect competition.

• Market Structures

• Nature and degree of competition among firms doing business in the same industry.

• Laissez-faire

• A market structure that has a large number of well informed independent buyers and sellers who exchange identical products.

• Imperfect competition

• "Allow them to do" and was the prevailing philosophy for limited government.

Match the following imperfect competition terms with the correct defintion.

• Monopolistic competition

• Very few large sellers dominate the industry.

• Oligopoly

• All conditions of perfect competition except identical products.

• Monopoly

• Only one seller of a particular product.

Match the following kinds of monopolies with the correct defintion and description.

• Geographic Monopoly

• Owned and operated by the govt. All three levels of the govt. can do this.

• Technological Monopoluy

• Situation where the costs of production are minimized by having a single firm produce the product.

• Natural Monopoly

• Based on ownership or control of a manufacturing method, process, or other advance.

• Government Monopoly

• Based on the absence of other sellers in the area.

Match the following terms with the correct definition.

• Nonprice competition

• Use of advertising, giveaways, or other promotions designed to convince buyers that the product is unique or better.

• Product Differentiation

• Real or perceived differences between competing products in the same industry.

• Economies of sale

• Agreeing to charge the same or similar prices for a product.

• Collusion

• Situation where the avg. cost of production falls as the firm gets larger.

• Price-fixing

• Formal agreement set to specific prices of to otherwise behave in a cooperative manner.

Which of the following is not a condition that is necessary for a perfect competition.

• Must be a small amount of buyers and sellers.

• Buyers and sellers deal in identical products.

• Buyer and seller act independently.

• Buyer and seller are reasonably well-informed about products and prices.

• Buyers and sellers are free to enter, conduct, or get out of business.

In which of these scenarios is it most challenging to enter the market?

• Perfect Competition

• Monopolistic Competition

• Oligopoly

• Pure Monopoly

True or False: The profit maximizing behavior of the monopolistic competitor is no different from that of other firms.

• True

• False

Match the following terms with the correct defintion.

• Negative Extrernality

• Unintended side effect that either benefits or harms a third party not involved in the activity that caused it.

• Externality

• Occurs whenever one of the conditions necessary for competitive markets does not exist.

• Market Failure

• Harm, cost, or inconvenience suffered by a third party because of actions by others.

• Public Goods

• Products that are collectively consumed by everyone.

• Positive Externality

• A benefit someone receives who was not involved in the activity that generated the benefit.

Match the following terms with the correct defintion.

• Price Discrimination

• Requirement that businesses reveal certain information to the public.

• Trust

• Practice of selling the same product to different consumers at different prices.

• Public Disclosure

• Combination of firms designed to restrict competition or control prices in a particular industry.

• Cease and Desist Order

• FTC ruling requiring a company to stop an unfair business practice.

Over time, what results in fewer firms dominating industries?

• Monopolies

• Oligopolies

• Mergers and Acquisitions

• Public Goods