Economics Chapter 7 Market Structures Quiz

Market

A place where buyers and sellers exchange goods/services

Perfect Competition

-Firms sell identical products Ex: Fruits

-Many firms/No one firm is more powerful

-No barriers to entry

-Theoretical (Doesn't Exist)

Commodity

The product is the same no matter who makes it or sells it

Barrier to Entry

-Anything that hinders the start-up or running of a business

-Part of Imperfect competition

Monopoly

-One firm controls a majority of the market power

-Manipulates market price

-Makes it difficult for competitors to compete

Price Discrimination

Charging different prices for the same product Ex: Airplane tickets

Predatory Pricing

Selling a product way below market price

Natural Monopolies

The market is more efficient when only one firm operates Ex: public transport, public water, postal service

Monopolistic Competition

-Many firms/sell similar products with differences (Differentiation)- size, quantity, color

-Some barriers to entry/some firms hold more power

Oligopoly

-3-4 firms/Hold most of the market power

-Collusion- Illegal sharing of info

-Many barriers to entry

Regulation/Deregulation

-Anti-Trust Law: Laws made to limit firms control on the market

Sherman Act- was one such antitrust act that outlawed mergers, broke up monopolies and also limited the conspiracy to monopolize.

Clayton Act- banned the practice of anti-competitive mergers

FTC Act- unfair methods of competition

Robinson-Patman Act- price discrimination

Specific Cases on Monopolies

-Microsoft: Accused of having a monopoly on windows operating systems

-Standard Oil: Accused of having a monopoly on oil refinery

Mergers

-Two or more firms combine into a single firm

-Must be approved by the federal government