1. Chapter 7 Section 1

2. Definitions
Perfect competition- a market structure in which a large number of firms all produce the same product. Commodity- a product that is the same no matter who produces it, such as petroleum, notebook paper or milk.

3. Definitions
Imperfect competition- a market structure that does not meet the conditions of perfect competition.

4. Definitions
Barrier to entry- any factor that makes it difficult for a new firm to enter a market.

5. Definitions
Start-up costs- the expenses a firm must pay before it can begin to produce and sell goods.

6. Perfect Competition
There are four conditions for perfect competition and here they are:
1) many buyers and sellers participate in the market.
2) sellers offer identical products
3) buyers and sellers are well informed about products.
4) sellers are able to enter and exit the market freely.

7. Price and Output
In a perfectly competitive market, price and output reach their equilibrium levels.
In the long run, output will reach the point where each supplying firm just covers all of its costs, including paying the firms owners enough to make the business worthwhile.

8. Barriers to Entry
Many things could qualify as a barrier to entry in a market. Start-up costs are one. If start up costs are high then it will be tougher for new firms to get into that business.
Another barrier to entry is technological know how. The more technology a market must use it makes it more difficult to find the labor needed to conduct what is necessary.

9. Perfect Competition
Most of the markets that have perfect competition are those that are deal with commodities. This is because commodities are the same regardless of who produces them.
The prices in perfectly competitive markets are commonly low because the producers ultimately know that purchases will be made according to price in this type of situation.

10. Questions
What are four conditions that can prevent a market from achieving a perfect competition?
1) many buyers and sellers participate in the market.
2) sellers offer identical products
3) buyers and sellers are well informed about products.
4) sellers are able to enter and exit the market freely.

11. How do start-up costs discourage entrepreneurs from entering a market?
Questions
How do start-up costs discourage entrepreneurs from entering a market?
To much money.

12. What are two examples of barriers to entry in the magazine market?
Questions
What are two examples of barriers to entry in the magazine market?
Start-up costs.

13. Why must perfectly competitive markets always deal in commodities?
Questions
Why must perfectly competitive markets always deal in commodities?

14. What is perfect competition?
Questions
What is perfect competition?
a market structure in which a large number of firms all produce the same product.

15. What is a commodity? Questions
a product that is the same no matter who produces it, such as petroleum, notebook paper or milk.

16. What is imperfect competition?
Questions
What is imperfect competition?
a market structure that does not meet the conditions of perfect competition.

17. What are start-up costs?
Questions
What are start-up costs?
the expenses a firm must pay before it can begin to produce and sell goods.

18. What is a barrier to entry?
Questions
What is a barrier to entry?
any factor that makes it difficult for a new firm to enter a market.

19. Describe prices and output in a perfect competitive market.
Questions
Describe prices and output in a perfect competitive market.