Basic Economics Midterms

Front 1

is a world of price-takers - all firms and consumers are too small to affect the price.

Back 1

Perfect Competition

Front 2

Perfectly competitive markets are idealized free markets

Back 2

Perfect Competition

Front 3

A system where buyers and sellers exchange goods or services

Back 3

Perfectly Competitive Market

Front 4

They are able to determine the process and the quantities of the different commodities sold.

Back 4

Perfectly Competitive Market

Front 5

2 Main Agents

Back 5

1. Producer (supplier)

2. Consumer (buyer)

Front 6

2 Different Types of Market

Back 6

1. Perfectly Competitive Market

2. Imperfect Market

Front 7

A ___________________ is a market in which there are many buyers and sellers so that each has a negligible impact on the market price.

a) Competitive Market

b) Imperfect Market

c) Perfect Market

Back 7

Competitive Market

Front 8

In this type of competition, products are the same (homogenous).

Back 8

Perfect Competition

Front 9

This competition has Numerous buyers and sellers so that each has no influence over price.

Back 9

Perfect Competition

Front 10

In this competition, buyers and sellers are price takers.

Back 10

Perfect Competition

Front 11

One seller, and seller controls the price

Back 11

Monopoly

Front 12

Few Sellers.

Not always aggressive competition.

Possible Collusion.

Back 12

Oligopoly

Front 13

Many Sellers.

Slightly differentiated products.

Each seller may set price for its own product.

Back 13

Monopolistic Competition

Front 14

•Under perfect competition, there are many small firms, each producing an identical product & each too small to affect the market price.

•The perfect competitor faces a completely horizontal demand (or dd) curve

•The extra revenue gained from extra unit is therefore the market price.

(__ __ Firms)

Back 14

Perfectly Competitive Firms

Front 15

An imperfection in the market (or price system) that prevents an effiecient allocation of resources. I.E. Imperfect competition; externalities; and Uneven Income Distribution.

Back 15

Market Failures

Front 16

If a firm appreciably affect the market price of its output, the firm is classified as an "___________________"

Back 16

Imperfect Competitor.

Front 17

__________________ prevails in an industry whenever individual sellers have significant or some measure of control over the price of their output.

Back 17

Imperfect Competition.

Front 18

____________________ competition produces high prices and inefficient/low levels of output. To control these conditions, gov't regulates businesses or put legeal antitrust constraints on business behaviour.

Back 18

Imperfect Competition.

Front 19

A single seller with complete control over an industry.

Greek works, mono = one, polist = seller.

Back 19

Monopoly.

Front 20

Their products usually have an "Inelastic" demand.

Back 20

Monopoly.

Front 21

Means "few sellers"; few in this context, can be a number as small as 2 or as large as 10 or 15 firms.

Each individual firm can affect the market price for the number of sellers to be stable, there must be some barriers to entry of new competitors.

Back 21

Oligopoly.

Front 22

There is a large number of sellers producing differentiated products.

This market structure resembles perfect competition in that there are many sellers, none of whom have a large share of the market.

DIFFERENTIATED PRODUCTS are ones whose important characteristics vary.

Entry and exit is free.

Back 22

Monopolistic Competition.

Front 23

Factors that make it hard for new firms to enter an industry. When barriers are high, an industry may have few firms and limited pressure to compete.

Back 23

Barriers to Entry

Front 24

Types of Barriers to Entry

Back 24

1. Legal Restrictions

2. High Cost of Entry

3. Advertising & Product Differentiation

Front 25

Granted to an inventor to allow temporary exclusive use (or monopoly_ of the product or the processes that is patented.

Back 25

Patent

Front 26

A type of Entry Restrictions that includes utilities, such as telephone, electricity and water, are given franchise monopolies by Congress to serve an area.

Back 26

Entry Restrictions

Front 27

A type of Entry Restrictions, it effect is keeping out foreign competitors in the country.

Back 27

Important Restrictions

Front 28

The amount of investment required to enter the market is very high. (I.E. TV Station)

Back 28

High Cost of Entry

Front 29

sometimes it is possible for companies to create barriers to entry for potential rivals by using advertising and product differentiation.

Back 29

Advertising and Product Differentiation

Front 30

The technology and cost structure of an industry help determine how many firms that industry can support and how big they will be.

Back 30

Cost and Market Imperfection.

Front 31

Arises when an increase in all inputs lead toa more-than-proportional increase in the level of output.

Back 31

Economies of Scale

Front 32

The second type of Market Failure.

Occurs when economic activities bestow benefits (+) or impose costs (-) on others without them paying or being compensated by the market. It is the impact of one person's actions on the well-being of a bystander.

Back 32

Externalities

Front 33

Beneficial externalities; activities that lead to the well-being of third parties without them paying for it.

I.E. Scientific discoveries; parks; security guards

Back 33

Positive Externalities

Front 34

Activities that imposes costs to third parties without them being compensated for it.

I.E. Pollution/environmental noise and health costs

Back 34

Negative Externalities

Front 35

The market economy rewards people according to their ability to produce things other people are willing to pay for.

Back 35

Unfair Distribution of Income

Front 36

To improve on market outcomes - regulate pollution; provide public goods; use minimum wage policy; impose taxes for welfare programs.

Back 36

Government Intervention