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Unformatted text preview: STUDY GUIDE >> ECONOMICS CHAPTERS 7, 8, & 9 CHAPTER SEVEN Perfect Competition : the ideal model of a market economy – five characteristics 1) Numerous buyers and sellers 2) Standardized product – a product that consumers consider identical in all essential features to other products in the same market 3) Freedom to enter and exit markets (No government regulations or restrictions, AND businesses/customers aren’t required to participate) 4) Independent buyers and sellers (Buyers cant come together and neither can sellers to influence prices) 5) Well-informed buyers and sellers (Buyers can do comparison shopping, sellers can learn what their competitors are charging) Monopoly : A market structure in which only one seller sells a product for which there are no close substitutes. (Characteristics – only one seller, control of prices, government regulations or other barriers to entry keep other firms out of the market) 1) Natural Monopoly – occurs when the costs of production are lower with only one producer (EBMUD/Water Companies) 2) Government Monopoly – exists when the government either owns and runs the business or authorizes only one producer (The Postal Service) 3) Technological Monopoly – occurs when a firm controls a manufacturing method, invention, or type of technology ( Polaroid Cameras) 4) Geographic Monopoly – exists when there are no other producers within a certain region (Professional Sports Teams – all of Bay Area goes to Oakland or SF for sports) Monopolistic Competition : occurs when many sellers offer similar, but not standardized, products (T-Shirt Market—competitive because there are many buyers and sellers, monopolistic because each seller has...
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This note was uploaded on 04/02/2012 for the course HIS 306k taught by Professor Spellberg during the Spring '12 term at University of Texas.

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