econ test 3

perfect competition

a market structure in which a large number of firms all produce the same product and no single seller controls supply or prices

commodity
commodity

a product,
such as petroleum or
milk, that is considered
the same no matter who
produces or sells it

Barrier to entry

any

factor that makes it

difficult for a new firm to

enter a market

imperfect competition

a market structure that fails to meet the conditions of perfect competition

start-up costs

the expenses a new business must pay before it can begin to produce and sell goods

monopoly

a market in which a single seller dominates

economies of scale

factors that cause a producer's average cost per unit to fall as output rises

natural monopoly

a market that runs most efficiently when one large firm supplies all of the output

government monopoly

a monopoly created by the government

patent 

a license that gives the inventor of a new product the exclusive right to sell it for a specific period of time

franchise

a contract that gives a single firm the right to sell its goods within an exclusive market

license

a government-issued right to operate a business

price discrimination

the division of consumers into groups based on how much they will pay for a good

market power 

the ability of a company to control prices and total market output

differentiation

making a product different from other, similar products

nonprice competition

a way to attract customers through style, service, or location, but not a lower price

oligopoly

a market structure in which few large firms dominate a market

price war

a series of competitive price cuts that lowers the market price below the cost of production

collusion

an illegal agreement among firms to divide the market, set prices, or limit production

price fixing

an agreement among firms to charge one price for the same good

cartel

a formal organization of producers that agree to coordinate prices and production

antitrust laws

laws that encourage competition in the marketplace

trust

an illegal grouping of companies that discourages competition, similar to a cartel

merger

when two or to check that they did not lead to unfair more companies join to form a single firm

deregulation

the removal of some government controls over a market

technological barrier

training needed to start certain businesses

monopolistic competition

market structure with many companies selling similar products

predatory pricing

setting a low price for a short tiime to drive competitors out of business

in a perfectly competitive market, what do prices correctly represent?

the opportunity cost of each product

what are the different forms of non price competition

physical characteristics

service level

location

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how much control over a price do companies in a perfectly competitive market

none

why is milk considered a commodity

its the same product no matter who sells it

how are start-up costs and market competition related

high costs reduce competition

why is perfect competition among businesses rare

most businesses product commodities

how does a perfect market influence output

each firm adjusts its output so that its costs, including profit, are covered

real life example of a nearly perfect competition

farmers market

imperfect competition is usually caused by

barriers to entry

why is a discounted airline ticket a form of price discrimination

only some travelers get discounts

which of these businesses have the advantage of economies of scale

automobile assembly plant

the controller of a monopoly sets the price of goods by charging

the price at which the profit is maximized

what is one example of a monopoly that the us government generally permits

professional sports leagues

which is true in monopolistic competition

higher than perfect competition

a cartel is only able to survive if

all members keep agreed output levels

how is monopolistic competition different from perfect competition

slight differences in products

in monopolistic competition what happens when a firm begins to charge an excessive price for its products

consumers will choose a rival firms product instead

securities exchange act of 1934

act created by the securities and exchange commision, the goal is to protect investors and maintain the integrity of securites markets.

what happens to an industry when the government deregulates it

the industry gains more control over its decisions

what happens when a company gaiins market power

it has the ability to set prices and output for the industry