Economics Chapter 7: Market Structures – Flashcards
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perfect competition
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a market structure in which a large number of firms all produce the same product and no single seller controls supply or prices
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commodity
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a product that is considered the same no matter who produces or sells it
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barrier to entry
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any factor that makes it difficult for a new firm to enter a market
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imperfect competition
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a market structure that fails to meet the conditions of perfect competition
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start-up costs
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the expenses a new business must pay before it can begin to produce and sell goods
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monopoly
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a market in which a single seller dominates
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economies of scale
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factors that cause a producer's average cost per unit to fall as output rises
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natural monopoly
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a market that runs most efficiently when one large firm supplies all of the output
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government monopoly
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a monopoly created by the government
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patent
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a license that gives the inventor of a new product the exclusive right to sell it for a specific period of time
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franchise
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a contract that gives a single firm the right to sell its goods within an exclusive market
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license
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a government-issued right to operate a business
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price discrimination
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the division of consumers into groups based on how much they will pay for a good
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market power
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the ability of a company to control prices and total market output
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monopolistic competition
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a market structure in which many companies sell products that are similar but not identical
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differentiation
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making a product different from other, similar products
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nonprice competition
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a way to attract customers through style, service, or location, but not a lower price
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oligopoly
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a market structure in which a few large firms dominate a market
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price war
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a series of competitive price cuts that lowers the market price below the cost of production
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collusion
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an illegal agreement among firms to divide the market, set prices, or limit production
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price fixing
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an agreement among firms to charge one price for the same good
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cartel
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a formal organization of producers that agree to coordinate prices and production
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predatory pricing
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selling a product below cost for a short period of time to drive competitors out of the market
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antitrust laws
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laws that encourage competition in the marketplace
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trust
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one company that controls too much of the market in an industry (eg, Standard Oil, which controlled oil wells, refineries, pipelines and gas stations)
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merger
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when two or more companies join to form a single firm
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deregulation
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the removal of some government controls over a market
