chapter 6

producer vs. producer

competition to sell products

consumers vs. consumers

competing to find the best deals first

1. prosperity 

2. lower 

3. better off 

fill in the blank 

results of competition: 

1. Leads to _________ as a nation

2. Better goods at ______ prices for everyone 

3. A poor person in a prosperous economies usually ______ ___ than a poor person in a struggling economy

hesiod 

greek poet who lived in the 1800s; wrote about competition in business 

competition

fill in the blank

hesiod was a greek poet who lived in the 1800s that wrote about ___________ in business

evil competition

seeks to harm and put others down

good competition 

motivates people to work harder to “beat” another person

industries

groups of firms that produce similar products or provide similar services

pure competition

fill in the blank

economics is also called “_____ _________” 

1. sellers 

2. buyers 

3. standardized 

4. market 

5. available 

fill in the blank 

list the characteristics of perfect competition:

1. Large number of ______ in the industry 

2. Large amount of ______ 

3. All businesses produce a ___________ product 

4. Easy access to the ________ of new businesses

5. Market information must be made _________ to all businesses

price taker 

fill in the blank 

most firms don’t have real control over the price so they take whatever price they can get

highest quality

fill in the blank

a price taker results in the ______ ______ of goods for the price people are willing to pay

pricing strategies 

manipulate the prices of products to attract new customers

non-pricing strategies

use different methods without changing the price

membership pricing

including customers to join a “club” of consumers

bundle pricing

selling multiple items together in 1 package for a lower price than if the products were sold separately

geographic pricing 

used by companies with outlets in different states or countries

monopoly

a single firm that is the only supplier of a good or service in an area

1. firm

2. substitutes

3. blocked

fill in the blank

list the characteristics of a monopoly:

1. A _____ must be the sole supplier of a good or service 

2. There must be no close ___________ for the firm’s products 

3. Entry into market must be ________

legal monopoly 

government allowing a business to legally monopolize an industry

• patents 

• trademarks 

• copyrights 

list some examples of a legal monopoly. 

natural monopoly

a single firm can satisfy the demand for a good more capably than multiple firms

utility companies 

what’s an example of a natural monopoly? 

monopolistic competition

the market in which each firm promotes a differentiated product within an industry

1. firms

2. differentiated

3. enter and exit

fill in the blank

list the characteristics of a monopolistic competition.

1. Large number of ______ in the industry 

2. Firms provide _________ products

3. Firms can ____ and _____ market easily

1. prices and quality

2. consumer

fill in the blank 

with the choices of a monopolistic competition, 

1. _______ and ______ can vary within products 

2. The ________ can choose a higher quality, expensive product or lower quality, cheaper product

oligopoly 

a market that occurs when an industry is dominated by only a few firms

2-4

fill in the blank

with an oligopoly, a minimum of __-__ firms must control 40% of an industry

1. few

2. differentiated or similar

3. discouraged

fill in the blank

list the characteristics of an oligopoly.

1. Only a ____ firms in the entire industry

2. Product can be _________ or _______ 

3. New firms are __________ from entering

1. capital

2. new business

fill in the blank

what are the potential barriers of an oligopoly?

1. A massive amount of ________ is needed to compete within an oligopoly 

2. Other businesses will seek legal means to prevent a ____ _______ from entering

collusion

multiple firms agreeing to charge the same high price

smaller

fill in the blank

with trusts, antitrust laws break up trusts into ______ organizations

• sherman act 

• Clayton act

what are some examples of antitrust laws?

trust

a collusion of businesses which join together to restrict or eliminate competition

tying contracts

forcing a customer to buy another product before they can use the product they want

price discrimination 

selling the same good at different prices to different people

air travel

what’s a legal exception to price discrimination?

federal trade commision

governmental agency whose purpose is to investigate trade practices

1. price fixing 

2. fraud 

3. identity theft 

fill in the blank 

government protection of consumers from fraud: 

1. The FTC works to eliminate _____ _____ (when several businesses in the same industry collude and agree to raise prices together) 

2. The FTC protects consumers from ______ 

The FTC protects from _______ ______ (stealing another person’s identity or bank information)

food drug administration (FDA)

responsible for maintaining the safety of the nation’s food supply

federal aviation administration (FAA)

oversees air travel safety

federal deposit insurance corp

insures money in banks

occupational safety and health administration 

ensures that workers have a safe work environment