Vocabulary
An economic model that allows economists to examine competition among businesses in the same industry
Market structure
A larger number of each of these ensures that no one controls prices
Many buyers and sellers
In perfect competition, no two products are the same
False
As a buyer, when a seller raises their prices, what can you do about it?
a) Absolutely nothing
b) Choose a different seller
c) Join another buyer to influence prices
d) Both (b) and (c)
b) Choose a different seller
What are the characteristics of perfect competition?
(Must list ALL)
- Many buyers and sellers
- Well-informed buyers and sellers
- Independent buyers and sellers
- Freedom to enter/exit markets
- Standardized products
What is perfect competition?
Perfect competition is the ideal model of a market economy
Producers can join or leave the market with no interferance
Freedom to enter/exit markets
A large number of buyers and sellers is necessary for perfect competition
True
In perfect competition, what kind of product do sellers offer?
a) Standardized product
b) Perfect product
c) Priced product
d) Discounted product
a) Standardized product
In your opinion, why are standardized products necessary in perfect competition?
(Yes, your opinion can be wrong)
Standardized products are necessary because different products would cause competition on a basis other than price, which is not allowed in a perfect competition
A market structure that lacks one of the characteristics of a perfect market structure.
Imperfect competition
All products are essentially the same
Standardized products
Buyers and sellers are completely independent and do not join together to influence prices
True
Producers are able to enter the market when it is _______ and exit when it becomes __________.
a) fun; boring
b) cool; lame
c) cheap; expensive
d) profitable; unprofitable
d) profitable; unprofitable
What would happen if either buyers or sellers were not well-informed on the market prices and market conditions?
The informed party would gain an unfair advantage against the uninformed and there would be a lack of balance in the market
What is a price taker?
Buyers and sellers do not join forces to influence prices
Independent buyers and sellers
Only sellers know the market prices and market conditions
False
Why would producers want to leave a market?
a) Because they feel like it
b) Low investment and market forces
b) Low investment and market forces
When buyers and sellers act independently, what happens?
The interaction of supply and demand sets the equilibrium price
A product that consumers consider identical in all essential features to other products in the same market
Standardized product
Both buyers and sellers are aware of market prices and other conditions
When prices rise, buyers are forced to stay with that seller regardless; buyers do not have the option to purchase from other sellers, as there are very few sellers
False
Give an example of a standardized product in Cayman
Answers may vary; milk, eggs, basic meats (not organic, specialized products, etc.)