ECONOMICS
GUIDED READING
CHAPTER 7: “MARKET STRUCTURES”
Section 1 “PERFECT COMPETITION” pg. 151-154
1. The simplest market structure is know as
2. Define perfect competition:
3. Name four (4) characteristics (conditions) for perfect competition:
A.
B.
C.
D.
4. Define commodity:
5. In most markets buyers to find information about prices
and availability represents a ______
6. Discuss what happens to the price of products with many firms and thus much
competition.
7. What happens to prices if a firm gains control of the market by forcing out
other firms?
8. Define barriers to entry:
9. Barriers to entry can lead to
10. Define imperfect competition:
11. What are start up costs?
12. What factors allow a perfectly competitive market to reach equilibrium?
Section 2 “MONOPOLY” pg. 156-164
1. Define Monopoly:
2. What is the principal condition that allows monopolies to exist?
3. Define economies of scale:
4. With economies of scale the average cost of producing a good would
when output exceeded a certain level.
5. Define a natural monopoly:
6. Why do they exist?
7. List two (2) examples of a natural monopoly:
A.
B.
8. What is the biggest advantage to a natural monopoly?
9. What is the government’s role in a natural monopoly?
10. How can technology affect a monopoly?
______
11. Define government monopoly:
12. One way the government can give a company monopoly power is by issuing a
13. Define patent:
14. Why do governments grant patented monopolies?
15. Define franchise:
16. Define license and give an example:
17. What is an industry monopoly?
18. What is the effect of a monopolists price increase?
19. What is the relationship between price and marginal revenue when a monopolist
cuts the price to sell more?
20. At what point do monopolists maximize his profits?
21. Define price discrimination and give an example:
22. Define market power and give an example:
Section 3 “Monopolistic competition and Oligopoly”
pg. 166-171
1. Define monopolistic competition and give an example:
2. How does monopolistic competition differ from pure competition?
3. List the four characteristics of monopolistic competition:
A.
B.
C.
D.
4. Firms in this market try not to compete on price alone. They use non-price
competition.
List four (4)
A.
B.
C.
D.
5. What happens to price in monopolistic competition?
6. What happens to output?
7. If a monopolistic competitive firm begins to earn high profits what two (2) things
would occur to bring down profit?
A.
B.
8. Are firms in monopolistic competition as efficient with their resources as those in
perfect competition?
9. Define oligopoly:
10. List three (3) barriers to entry for oligopolies:
A.
B.
C.
11. Oligopolies present a big challenge to Government. They tend to work together
to form a .
List (3) government concerns:
A.
B.
C.
12. Define price war, give an example:
13. Define price fixing and give an example:
14. What is a cartel?
Section 4 “Regulation and Deregulation”
pg. 173-177
1. Markets dominated by a few large firms tend to have prices and
out- put than markets with many sellers.
2. Define predatory pricing:
3. Which two divisions of the federal government oversee industry to keep firms from controlling price and the supply of goods?
A.
B.
4. Define antitrust laws:
5. Define trust:
6. In 1890 congress passed an Act, which made it illegal to form monopolies that
limited trade between states. What is the name of this law?
7. Name the major company that the Justice Dept. accused of violating this act.
8. Define merger:
9. If a company can prove that by merging with another company they can
Cost and customer prices or lead to a better product the will
allow the merger.
10. Define deregulation:
11. Name a major industry that the government has deregulated.
12. The government uses these two (2) tools to promote competition. Name them:
A.
B.
3