Market Structures and Their Characteristics

These flashcards review key concepts related to market structures, including perfect competition, monopolies, monopolistic competition, oligopolies, and the effects of deregulation.

What characterizes perfect competition?

A market structure with a large number of firms producing identical products, with informed buyers and sellers, and free market entry and exit.

What are barriers to entry in a market?

Factors that make it difficult for new firms to enter a market, including start-up costs.

What is a monopoly?

A market dominated by a single seller that has high barriers to entry.

What are natural monopolies?

Markets that run efficiently when one large firm provides all of the output.

What is the purpose of patents?

Licenses that give the inventor the right to sell their product for a certain period of time.

What is a franchise in terms of market structure?

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

What is price discrimination?

The division of customers into groups based on how much they will pay for a good, often resulting in targeted discounts.

What characterizes monopolistic competition?

A market structure with many firms, few artificial barriers to entry, slight control over price, and similar but differentiated products.

What does collusion refer to in an oligopoly?

An agreement among members to set prices and production levels.

What are cartels?

Associations of producers established to coordinate prices and production in a market dominated by a few large, profitable companies.

What are the positive effects of deregulation?

Lower costs, increased competition, and lower prices.

What are the negative effects of deregulation?

Less control, decreased product quality, and increased negative externalities.