Understanding Markets & Market Structures

These flashcards cover key concepts related to understanding markets and market structures, including definitions, characteristics, and classifications of various market types.

What is a market?

A market is where buyers and sellers meet to exchange goods, services, or resources for money.

What is market price?

The price at which the quantity demanded by consumers equals the quantity supplied by producers.

What is equilibrium in a market?

A state where supply equals demand, resulting in no excess supply or demand.

What happens during excess demand?

Demand is greater than supply, causing prices to rise as consumers compete for limited goods.

What is perfect competition?

A market structure with many sellers offering identical products, with no barriers to entry.

What is a monopoly?

A market structure where a single seller controls the entire market for a unique product.

What are the four classifications of markets according to competition?

1. Perfect Competition 2. Monopolistic Competition 3. Oligopoly 4. Monopoly.

What is meant by oligopoly?

A market structure characterized by a few large firms that dominate the market and can influence prices.

What is price discrimination?

Charging different prices to different consumers for the same product based on their willingness to pay.

What is the formula for calculating Average Cost (AC)?

AC = Total Cost ÷ Quantity produced.

What is marginal cost (MC)?

The cost of producing one extra unit of a good.

How do markets achieve price flexibility?

Prices adjust quickly in response to changes in supply and demand.

What are the advantages of perfect competition?

Allocative efficiency, consumer welfare, productive efficiency, and dynamic efficiency.

What are some barriers to entry in a monopoly?

Natural resource control, legal barriers (patents), and high capital costs.

What is a key characteristic of monopolistic competition?

Firms sell differentiated products and engage in non-price competition.

What is collusion in the context of oligopoly?

When firms secretly agree to set prices or outputs instead of competing against each other.