CHAPTER 9

Three conditions for a market to be perfectly competitive?
Many buyers and sellers, with all firms selling identical products, and no barriers to new firms entering the market.
In perfectly competitive markets, prices are determined by
The interaction of market demand and supply because firms and consumers are price takers.
Price taker
Buyer or seller that is unable to affect the market price.
A buyer or seller that takes the market price as given
When are firms likely to be price takers?
A firm is likely to be a price taker when….. it sells a product that is exactly the same as every other firm. It represents a small fraction of the total market.
Consumers are usually price takers when they buy most goods and
Is “monopoly” a good game for the game Monopoly? What aspects of the game involve Monopoly? Monopoly….
Is a good game because players seek to become the only owner of property, just as monopoly is the only seller of a good or service.
What are the four most important ways a firm becomes a monopoly?
The four main reasons a firm becomes a monopoly are”
The government blocks entry, control of a key resource, network externalities, and economies of scale.
If patents reduce competition, why does the federal government grant them?
The federal government grants patents
To encourage firms to spend money on research to create new products
What is a public franchise?
A firm designaed by the govt as the only legal provider of a good or service
Are all public franchises natural monopolies?
All public franchises are not natural monopolies, and all natural monopolies are not public franchises.
What is natural about a natural monopoly?
A natural monopoly
Develops automatically due to economies of scale.
If firms incurred no cost in developing new technologies and new products, all of the following will be true, except:
There would be still be need for patents so that firms can have some government protection to charge higher prices.
What is the difference between a monopolist demand curve and a market demand curve?
A monopolist’s demand curve is the same as the market demand curve.
What is the