7.1-7.3 - Market Structures

Match the following terms with the correct defintion.

• Market Structures

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

• Imperfect competition

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

• Perfect competition

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

• Laissez-faire

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

Match the following imperfect competition terms with the correct defintion.

• Oligopoly

• Very few large sellers dominate the industry.

• Monopolistic competition

• Only one seller of a particular product.

• Monopoly

• All conditions of perfect competition except identical products.

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.

• Natural Monopoly

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

• Technological Monopoluy

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

• Government Monopoly

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

Match the following terms with the correct definition.

• Nonprice competition

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

• Product Differentiation

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

• Economies of sale

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

• Collusion

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

• Price-fixing

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

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.

• Public Goods

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

• Market Failure

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

• Positive Externality

• Products that are collectively consumed by everyone.

• Negative Extrernality

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

• Externality

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

Match the following terms with the correct defintion.

• Trust

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

• Price Discrimination

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

• Cease and Desist Order

• Requirement that businesses reveal certain information to the public.

• Public Disclosure

• 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