Describe characteristics and give examples of perfect competition (pure competition). * Many buyers and sellers participate in the market (famers market); * Sellers offer identical products (oranges and shoes); * Informed buyers and sellers (car dealerships, computers); * Ability for sellers to enter or exit the market freely (restaurants, consultants service)

How do start-up costs discourage entrepreneurs from entering the market? * High start up costs discourage new ventures by creating the potential for large losses; many people are unwilling to take the risk of starting a new business
.

What is an example of barriers to entry in the magazine market? * Start up costs – example: office space * Technology - example: word processing equipment *
Why does government usually approve of natural monopolies? * They operate at a lower cost to both consumers and producers, so they are generally allowed because they are the most efficient source of that good or service *
What are three different forms of price competition? 1) Discounted airline fares 2) Manufacturer’s rebate offers 3) Senior citizen or student discounts 4) Kids fly or stay free promotions *
What are economies of scale? * When an economies of scales exist, a firm’s start-up costs are high, but its average costs fall for each unit it produces, even at a level of output high enough to supply the entire the market *
What are the four conditions of monopolistic competition? 1) Many firms 2) Few artificial barriers to entry 3) Slight control over price 4) Differentiated products
.

How do economists determine whether a market is an oligopoly? * If the four largest firms produce at least 70 to 80 percent of the market’s output. * Give three examples of non-price competition? 1)