Micro 8.8

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What are 5 features of perfect markets?
Perfect information, no barriers, homogenous products & FOP, large number of buyers and sellers, perfect mobility of FOP.
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What is imperfect information?
When economic agents do not know everything they need to know in order to make a fully informed decision.
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What is asymmetric information?
A source of information failure where one economic agent knows more than the other, giving them more power in a market transaction.
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What may producers do with asymmetric information?
Exploit consumers.
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How can government intervention help asymmetric information?
To improve the quality and reliability of information held by economic agents, and to redress the imbalance
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What is a monopoly?
An extreme example of a market structure that, in its pure form, means that only firm supplies a market.
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Why does a monopoly producer have no incentive to act economically efficient in a free market without government intervention?
Since there are no rival firms to take its market share.
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Why are there no rivals firms in a monopoly?
Because of significant barriers to entry to the market, such as product differentiation and large economies of scale.
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How can monopolies be disadvantageous for consumers?
They will not benefit from the lowest prices, or have a choice of products.
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What does market failure lead to?
Productive and allocative inefficiency and possibly reduced choice for consumers, which is an equity issue.
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What is occupational immobility?
When individuals find it difficult to move between occupations due to the lack of specific skills and qualifications required.
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What is geographical immobility?
When individuals find it difficult to move between occupations due to not being able to afford accomodation or dependent relatives.
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Other cards in this set

Card 2

Front

What is imperfect information?

Back

When economic agents do not know everything they need to know in order to make a fully informed decision.

Card 3

Front

What is asymmetric information?

Back

Preview of the front of card 3

Card 4

Front

What may producers do with asymmetric information?

Back

Preview of the front of card 4

Card 5

Front

How can government intervention help asymmetric information?

Back

Preview of the front of card 5
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