Econ Chapter 7

A Market Structure

an economic model that looks at competition in the same business.

Perfect Competition is the ideal model. It needs 5 things

Numerous buyers and sellers, Standardized product, Freedom to enter and exit market, Independent buyers and sellers, Well

The least competitive market structure is

monopoly, where there’s only one seller of a product with no close substitutes.

A cartel

a formal organization where sellers act together to set prices and limit output.

price barrier

something that stops other firms from entering the market.

3 Characteristics of a Monopoly

Only One Seller, Restricted Market, Control of Prices

Natural Monopoly

Occurs when costs are lowest when only one firm provides output.

Technological Monopoly

Occurs when firm controls a manufacturing method, an invention or technology

Government Monopoly

Government either owns or controls business

Geographic Monopoly

Occurs when no other producers or sellers in a region.

Monopolistic Competition

where many sellers offer similar, but not standardized product.

Product differentiation

a way producers try to distinguish a product from a similar product

Nonprice Competition

are other ways (besides lower price) to convince consumers to buy your good

Characteristics of Monopolistic Competition

Many Sellers & Many Buyers, Similar but Differentiated Products, Limited Control of Prices, Freedom to Enter & Exit market,

Oligopoly

a market structure where there are only a few sellers of a similar product

The government controlling business through rules and laws is called

regulations

The most important ones are _____, giving government power to break up monopolies

antitrust legislation

A group of firms combined to reduce competition

Trusts

Mergers

is when one company buys up another.

Businesses sometimes work together to set prices of competing products. This is called ______

Price Fixing

Market Allocation

when competing businesses divide market among themselves.

Predatory Pricing

when businesses set price below cost for a time to drive out competition.