Questions for economic reasoning and discussion

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ESSENTIAL VOCABULARY

1. Differentiate v – to mark or show a difference between or in things – відрізняти (ся), розрізняти; диференціювати, робити несхожим.

Dominate v – to exert controlling influence or power over something – панувати, домінувати, володарювати. To dominate a market – панувати на ринку. Syn. to rule, to control.

3. Feature n – a distinctive attribute or aspect of something – особливість, характерна риса; якість, властивість. Syn. a characteristic, a quality.

4. Identical adj – similar in every detail, exactly alike – однаковий, ідентичний, тотожний. Syn. equal, the same.

5. Intermediary n – a person who acts as a link between people in order to try to bring about an agreement– посередник.

6. Market n – a meeting together of people for the purpose of trade, by private purchase and sale – ринок. Competitive market – конкурентний ринок, market condition(s) – кон’юнктура ринку/стан ринку, market power – ринкова влада. To exit the market – залишити ринок/піти з ринку.

7. Obstacle n – something in the way that stops progress or makes it difficult - перешкода, перепона, завада. Obstacles to entry – перешкоди до вступу. Syn. a barrier, an obstruction.

8. Protect v – to provide protection against or compensation for loss, risk, etc. – захищати. Syn. to safeguard.

9. Reject v – to refuse to accept – відхиляти, відмовляти(ся). To reject a price – відхилити ціну. Syn. to refuse, to deny.

10. Restriction n – a limiting condition or measure, esp. a legal one – обмеження.

11. Trade v – to engage in buying and selling for profit – торгувати.

12. Unique adj – existing as the only one or as the sole example – єдиний, єдиний у своєму роді, унікальний. Syn. single.

TEXT

Market is an actual or nominal place where forces of demand and supply operate, and where buyers and sellers interact (directly or through intermediaries) to trade goods and services. Market is created when there is the seller, the buyer, the price, the product and competition, the cornerstone of the free enterprise system.

In most economic systems consumers and producers exchange their goods and services in many competitive markets. Economists generally agree that there are four major degrees of competition resulting in different market structures. Market structure can be defined in terms of * the number and the power of the buyers and sellers, the nature of the product (product differentiation), barriers to entry and exit, and availability of information.

The principal types of market structures are perfect competition, monopolistic competition, oligopoly, and monopoly.

Perfect ( or Pure) Competition. The laws of supply and demand operate only under conditions of perfect competition. Perfect competition is the name given to a market structure characterized by the following features.

· There are a lot of buyers and sellers purchasing and selling exactly the same commodity. It means that no one buyer or seller can affect the market price by entering or leaving the market. They can accept the market price or reject it.

· Identical commodity is offered for sale. It denotes that all units of the commodity are the same in the minds of buyers and they must be willing to purchase it from the seller who offers this product at the lowest price.

· Each buyer or seller has perfect knowledge of market prices and quantities meaning that all of them are completely aware of * the prices and quantities at which transactions are taking place in the market. This permits buyers to compete with buyers, and sellers with sellers.

· There are no barriers to enter or exit the market. It means that there must be no obstacles to prevent firms from entering or leaving the particular market at will.

The stock exchanges are good examples of this market structure.

Monopolistic Competition. Perfect competition and perfect competitive markets exist in only a few businesses and industries. In fact, most businesses work very hard to make their products and services special or unique. Such a type of market is called monopolistic competition. It is characterized by:

· a large number of firms producing similar but not identical products;

· product differentiation;

· some restrictions of information about market prices and quantities;

· relatively easy entry for firms.

Sellers do their best to make their goods or services more attractive than the competitors’. The process of creating uniqueness in products is known as product differentiation. It distinguishes monopolistic competition from perfect competition. Brand name, color package, location of the seller, customer service, credit conditions, or the smile of the salesperson can differentiate a product, even if the products themselves are physically equal. Product differentiation benefits buyers by providing them with a way to distinguish between competing goods as well as sellers by enabling them to increase their market power.

Monopolistic competition is found in many industries. Some specific examples include the manufacture of clothing, household goods, shoes, and furniture.

Oligopoly. An oligopoly is a market dominated by a few large suppliers. Breakfast cereals, automobile and computer hardware are examples of industries controlled by oligopolies. It is characterized by:

· A limited number of leading firms producing a particular branded product.

· Interdependence between firms. It suggests that each firm must take into account the possible reactions of other firms in the market when making pricing and investment decisions.

· Barriers to entry. It denotes that competing firms can enter the markets only if they pay the patent holders for permission to use the process or find a new method of production not protected by existing patents.

· Lack of competitive pricing as oligopolists know that if they reduce or increase their prices the competitors will do the same.

Monopoly. A monopoly is defined as a single firm producing a product, for which there are no close substitutes. To put it another way, no other firms produce a similar product. Monopolies have the following qualities:

· A single seller or monopolist who determines supply and has complete control over the market price.

· No close substitutes. The product sold by a monopoly is different from those offered by other firms.

· Barriers to entry. Competing firms are unable to enter the market where a monopoly exists.

Imperfect Competition. Perfect competition, with its many buyers and sellers, all of whom have perfect knowledge of market conditions, rarely exists. Neither does perfect monopoly, wherein buyers, unable to find substitutes, pay a price selected by the monopolist. Thus, in reality, most of the nation’s economic activity occurs under conditions of imperfect competition.This market structure consists of industries and markets that fall in between two extremes of perfect competition and pure monopoly. Professor Joan Robinson referred to this kind of trade as imperfect competition in which sellers had more freedom to determine prices than they had under perfect competition, but less than they had under monopoly.

COMMENTS:

in terms of – з точки зору;

are completely aware of * – цілком обізнані з.

Exercise 1. Read, translate into Ukrainian in written form and learn by heart the definitions of the following economic terms and concepts.

1. Competition: The rivalry between suppliers in the same market, usually in selling at the lowest price or in giving better quality or generally offering better value for money.	______________________________________ ______________________________________ ______________________________________ ______________________________________ ______________________________________
2. Competitive market: One in which there is only one price for a given commodity at any one time; all buyers and sellers know the market conditions.	______________________________________ ______________________________________ ______________________________________ ______________________________________ ______________________________________
3. Imperfect competition: A market in which there is neither pure perfect competition nor pure monopoly.	______________________________________ ______________________________________ ______________________________________
4. Market: Any mechanism that enables buyers and sellers come to an agreement about purchase and sale of merchandise.	______________________________________ ______________________________________ ______________________________________ ______________________________________
5. Market structure: The types of competitive market within which firms operate.	______________________________________ ______________________________________ ______________________________________
6. Monopolistic competition: A state of competition in a market in which many firms compete, producing similar but slightly differentiated products.	______________________________________ ______________________________________ ______________________________________ ______________________________________ ______________________________________
7. Monopoly: A market in which there is only one seller.	______________________________________ ______________________________________
8. Oligopoly: A term applied to markets dominated by a few large firms.	______________________________________ ______________________________________ ______________________________________
9. Perfect (Pure) Competition: A market for uniform products in which there many buyers and sellers, no one of which is big enough to affect the price, and has full knowledge of market conditions.	______________________________________ ______________________________________ ______________________________________ ______________________________________ ______________________________________ ______________________________________
10. Product differentiation: A process of creating uniqueness in a product.	______________________________________ ______________________________________ ______________________________________

Exercise 2. Give the Ukrainian equivalents for the following.

1. to trade goods and services – _________________________________________

2. four major degrees of competition – ____________________________________

3. characterized by the following features – ________________________________

4. no one buyer or seller – ______________________________________________

5. all units of the commodity – __________________________________________

6. a stock exchange – __________________________________________________

7. a process of creating uniqueness – _____________________________________

8. to increase their market power – _______________________________________

9. а limited number of leading firms – ____________________________________

10. interdependence between firms – ______________________________________

11. not protected by existing patents – _____________________________________

12. no other firms produce – _____________________________________________

13. most of the nation’s economic activity – _________________________________

14. to fall in between the extremes – _______________________________________

Exercise 3. Find the English equivalents for the following words and phrases from the text.

1. Реальне або умовне місце – _________________________________________

2. наріжний камінь системи вільного підприємництва – ___________________ ____________________________________________________________________

3. перешкоди для входу та виходу – ____________________________________

4. за умов досконалої конкуренції – ____________________________________

5. погоджуватися з ринковою ціною – __________________________________

6. не повинно бути перешкод – ________________________________________

7. робити свої товари та послуги особливими або унікальними – ____________ ____________________________________________________________________

8. відносно легкий вхід для фірм – _____________________________________

9. умови надання кредиту – ___________________________________________

10. предмети домашнього вжитку – ______________________________________

11. виробляючи певну брендову продукцію – _____________________________ ____________________________________________________________________

12. платити власнику патенту за дозвіл – _________________________________

13. конкурентне ціноутворення – ________________________________________

14. повністю контролювати ринкову ціну – _______________________________ ____________________________________________________________________

15. неспроможні знайти товари-замінники – ______________________________ ____________________________________________________________________

Exercise 4. Match the verbs/verbal phrases, prepositions and nouns/noun phrases as they occur together in the text. Translate the expressions they make into Ukrainian.

To affect	for of to between in with	industries and markets
to compete	competing goods
to find	permission
to consist	a new method of production
to distinguish	buyers
to refer	different market structures
to pay	the market price
to result	this kind of trade

Exercise 5. Copy out from the texts the sentences containing the following words and word-combinations and translate these sentences into Ukrainian.

1. is defined in terms of _______________________________________________

2. transactions are taking place __________________________________________ ____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

3. must take into account _____________________________________________ ____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

4. the smile of the salesperson __________________________________________

5. as a single firm ____________________________________________________

6. sold by a monopoly _______________________________________________

7. neither does perfect monopoly ________________________________________

8. sellers had more freedom ____________________________________________

Exercise 7. Choose words and word-combinations that have the same or similar meaning to the words listed below. More than one is possible.

1. відрізняти, розрізняти (2) ___________________________________________

2. відхилити ціну(3) __________________________________________________

3. впливати (3) ______________________________________________________

4. єдиний (2) ________________________________________________________

5. захищати (3) ______________________________________________________

6. однаковий (3) _____________________________________________________

7. панувати (3) ______________________________________________________

8. перешкода (3) _____________________________________________________

9. погоджуватись (2) _________________________________________________

10. характерна риса (4) ________________________________________________

to refuse a price	to safeguard	to control	to differentiate
to have an effect on	to deny a price	a quality	to dominate
to cover	to influence	to accept	an obstruction
a feature	to rule	identical	to protect
an obstacle	a characteristic	unique	to agree
single	equal	to affect	the same
to reject a price	to distinguish	a barrier	an attribute

Exercise 8. Translate the words in brackets into English.

Markets are flesh and blood of a capitalist economy, and various degrees of competition … (приводять до різних ринкових структур).

The concept of market structure deals with issues like how many buyers and sellers … (знаходяться на ринку), whether they make … (однакові чи унікальні товари), and whether firms can … (вийти на ринок чи залишити його) at will.

Most markets and industries refer to … (до однієї з чотирьох основних ринкових структур): perfect (pure) competition, monopolistic competition, oligopoly, and monopoly.

… (за умовами досконалої конкуренції) there are a large number of sellers … (цілком однакової продукції). All buyers and sellers … (мають повну свободу) to enter and leave the market, and … (повну інформацію щодо цін та обсягів). … (на ринку існує конкуренція) between many buyers and sellers and no group of buyers or sellers … (не може впливати на ціну товару). As a result, whether a person is a buyer or a seller, he or she must … (погодитися з ринковою ціною або відхилити її ).

As in the case of perfect competition, monopolistic competition is characterized by … (великою кількістю продавців).

A key feature … (монополістичної конкуренції) is that firms … (виробляють схожі, але не одинакові товари), giving each producer a small degree … (ринкової влади).

In addition to the existence of a large number of firms and … (диференціації продукції), … (відносна легкий вхід та виходу) is considered … (іншою важливою характеристикою) of a monopolistic competition.

… (важливою рисою) of an oligopoly is (взаємозалежність обмеженої кількості провідних компаній).

Oligopolies are characterized … (перешкодами до виходу) and strategic interaction (між фірмами) within the industry. However, unlike monopolistic competition, if an oligopolistic firm … (змінює свою ціну або обсяг випуску продукції), it … (впливає на прибуток своїх конкурентів) in the industry. Thus, an oligopolistic firm always considers its competitors’ response … (приймаючи свої рішення щодо ціноутворення та капіталовкладень).

Monopoly can be considered the opposite to perfect competition. It is a market structure in which … (є тільки один продавець).

The monopolist … (захищений від конкуренції) by obstacles to entry. This single seller … (єдиного в своєму роді товару) that have no close substitutes completely … (повністю панує на монополістичному ринку).

In a monopoly, one firm or organization … (повністю контролює ринкову ціну).

Exercise 9. At least one word or word-combination has been omitted from each of these sentences. Fill in the blanks from the list of missing words below and translate them into Ukrainian.

1. Product differentiation provides a way for firms within certain industries ___________________________________________. – _______________________ ________________________________________________________________________________________________________________________________________

2. _______________________________ is one of a number of ways to prevent new firms from entering the market called _______________. – ____________________

3. ____________________________ is a market structure that consists of industries or markets that fall ________________________________ perfect competition and monopoly. – __________________________________________________________ ________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

4. If a firm can differentiate its product successfully, it can attract _______________ _________ and increase its profit. – _______________________________________ ________________________________________________________________________________________________________________________________________

5. _____________ and ____________ of firms in a market is the factors determining ____________________________________. – ______________________________ ____________________________________________________________________________________________________________________________________________________________________________________________________________

6. Sellers in ___________________________________________ have no influence over the price at which they can sell their products. – _________________________

7. There is no competition in _________________. – _________________________

____________________________________________________________________

8. Economists describe a market with many sellers providing similar but not identical products as _________________________________. – ________________

9. Circumstances that make it difficult __________________________ are described as "barriers to entry". – _________________________________________________

________________________________________________________________________________________________________________________________________

10. Unlike perfect competition, the sellers under monopolistic competition differentiate ________ ______________________. – _________________________

to enter the market	the power	competitive product	the number
a perfect competitive market	to increase their market power
the type of market structure	monopolistic competition
in between the extremes	the high cost of entry
oligopoly	monopoly	imperfect competition

Exercise 10. Pair the halves of the sentences. Translate them into Ukrainian.

1. Consumers and producers exchange their goods and services	a. a single firm producing a product for which there are no close substitutes.
2. Oligopoly is a market in which there are	b. no single firm controls the market.
3. By the structure of the market economists mean	c. the number and the power of the buyers and sellers.
4. The most important point about perfect competition is that	d. a small number of large firms that share market power.
5. A monopoly may be defined as	e. in many competitive markets.
6. Under the conditions of perfect competition prices are determined by	f. it is difficult for competing firms to enter the oligopoly.
7. In monopolistic competition many firms compete with one another for the same consumers by	g. a large number of firms producing similar but not identical products and relatively easy entry for firms.
8. Product differentiation benefits sellers by providing them a way of	h. making potential consumers believe that their products and services are special or unique.
9. Monopolistic competition is characterized by	i. making their products more attractive than the competition.
10. As there are no other firms producing a similar product	j. a large number of independent buyers and sellers of exactly the same products.
11. Because of the high cost of entry	k. the forces of supply and demand.
12. Perfect competition is the name given to market structure characterized by	l. a monopoly has the power to select any price that will yield the greatest profit.

____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________

Exercise 10. Match each term in column A with its definition in column B.

A	B
1. Competition	a. A form of competition where sellers can influence buyers by differences in the quantity or appearance of the goods they produced
2. Competitive market	b. A situation in a market in which seller faces no competition
3. Imperfect competition	c. Distinction between products that fulfill the same purpose but are made by different producers and therefore compete with each other
4. Market	d. A market in which a few sellers supply many buyers
5. Market structure	e. A form of competition in which the price of a good is the same throughout the market because buyers and sellers have perfect knowledge of market conditions
6. Monopolistic competition	f. The rivalry among buyers and among sellers in the purchase and sale of resources and products
7. Monopoly	g. One in which the price of a given commodity is at level which results in the sale of the whole quantity offered
8. Oligopoly	h. The institution through which buyers and sellers interact and engage in exchange
9. Pure competition	i. The way in which a market is organized
10. Product differentiation	j. A state of competition in a market in which buyers and sellers have imperfect knowledge of the market and more freedom to determine prices

Exercise 11. Translate the sentences into English using the active vocabulary.

1. Досконала конкуренція – це ринкова ситуація, де існує багато незалежних продавців цілком однакової продукції, але жоден продавець не може впливати на ринкову ціну.	____________________________________________________________________________________________________________________________________________________________________________________
2. На ринку досконалої конкуренції покупці і продавці залежать від сил пропозиції і попиту, які визначають ціну, з якою покупці і продавці або повинні погодитись або залишити ринок.	____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________
3. Індивідуалізація продукції існує на ринку, коли кожний виробник продає виріб, чиї характеристики відрізняють його від продукції конкурентів.	____________________________________________________________________________________________________________________________________________________________________________________
4. Роблячи свою продукцію трохи іншою, фірма може привабити більше клієнтів і захопити економічний ринок.	________________________________________________________________________________________________________________________________________________
5. Однією з причин, чому у деяких галузях промисловості панують кілька провідних компаній, є те, що існують певні перешкоди виходу на олігополістичний ринок.	____________________________________________________________________________________________________________________________________________________________________________________
6. Індивідуалізація продукція – це процес створення унікальності продукції, що дає можливість виробнику змусити споживачів надати перевагу його продукції.	____________________________________________________________________________________________________________________________________________________________________________________
7. Фірма називається монополією, якщо вона є постачальником єдиної в своєму роді продукції, на яку немає замінників, але є багато покупців.	____________________________________________________________________________________________________________________________________________________________________________________
8. Фірма, яка монополізує ринок, контролює постачання продукції і призначає будь-яку ціну, що може привести до різкого зростання цін.	________________________________________________________________________________________________________________________________________________

Exercise 12. Discuss these statements or express your opinion on them. The following phrases may be helpful:

§ May I stress once again…,

§ I might as well add that…,

§ I see no point in saying…,

§ I'd like to draw your attention to the following…,

§ I cannot make up my mind as to…,

§ The thing I want to mention is…,

§ There is something (quite a lot) in what you say, but…,

1. Under conditions of perfect competition market, all buyers and sellers are completely aware of the prices and quantities at which transactions are taking place in the market.

2. The product sold by a monopoly is different from those offered by other firms.

3. Imperfect competition is a combination of the key characteristics of perfect competition and monopoly.

Exercise 13. Answer the following questions.

1. What is a market? 2. When is market created? 3. What is competition? 4. What is a competitive market? 5. What characteristics define the structure of a market? 6. What are the principal types of market structures? 7. What is perfect competition? 8. What are the features of perfect competition? 9. Why can no individual alter the market price? 10. What does an identical commodity offered for sale denote? 11. Why do sellers compete with sellers and buyers with buyers? 12. What does the characteristic of perfect competition “no barriers to enter or exit the market” mean? 13. What is monopolistic competition? 14. What are the key characteristics of monopolistic competition? 15. What distinguishes monopolistic competition from perfect competition? 16. What is product differentiation? 17. Why does a firm try to differentiate its product? 18. How does product differentiation benefit consumers? 19. What is oligopoly? 20. What are the key characteristics of oligopoly? 21. Why is it difficult for competing firms to enter the oligopolistic market? 22. Why is competitive pricing ineffective in the oligopolistic market? 23. How does oligopoly differ from monopolistic competition? 24. What is monopoly? 25. What are the qualities of monopoly? 26. Do supply and demand affect the market price under monopoly? Why? 27. What is imperfect competition? 28. What types of market structure does imperfect competition comprise? 29. How does imperfect competition differ from perfect competition and monopoly?

Questions for economic reasoning and discussion

1. Is perfect competition fantasy or is it real? Why?

2. Is product differentiation wasteful? Would society be better off (житиме краще) with only one of each product instead of many variations of the same product?

3. A monopolist can always make a profit because with no competition it can charge any price it likes. Do you think this statement is true?

4. How are different market structures (perfect competition, monopolistic competition, oligopoly and monopoly) affected by such factors as the number of the buyers and sellers, product differentiation, and barriers to entry?

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