4.1.5 Market Structures Flashcards

1
Q

Define Oligopoly

A

An industry dominated by a few large firms

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2
Q

Define Concentration Ratio

A

The percentage of market share taken up by the biggest firms

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3
Q

Define Profit Maximisation

A

Firms attaining the highest level of profit where Marginal Cost = Marginal Revenue (MC=MR)

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4
Q

Define Monopolistic Competition

A

A market structure where many firms selling slightly differentiated products

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5
Q

Define Cartels

A

When a few large producers agree to cooperate with each other in terms of pricing

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6
Q

Define Collusion

A

When firms agree to fix the price in order to maximise producer welfare

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7
Q

Define Price Discrimination

A

When producers sell the same product to different consumers at different prices depending on elasticities of demand

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8
Q

Define Creative Destruction

A

The innovative mechanism which states that new production units replace old out-dated ones

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9
Q

Define Contestable Markets

A

A market where there are no entry and exit costs and no sunk costs

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10
Q

Define Static Efficiency

A

A combination of productive and allocative efficiency. Where we look at a specific snapshot of a firms output level

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11
Q

Define Dynamic Efficiency

A

When firms use supernormal profits to invest in innovative measures such as research and development

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12
Q

Define Allocative Efficiency

A

The optimal distribution of goods and services taking consumer preferences into account

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13
Q

Define Productive Efficiency

A

The production of maximum output with minimum costs.

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14
Q

Define X Inefficiency

A

When firms lack the incentives to cut their costs

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15
Q

Define Consumer Surplus

A

The difference between the price that a consumer is willing to pay and the price that the consumer actually pays

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16
Q

Define Producer Surplus

A

The difference between the price that a producer is willing to sell at and the price the producer actually sells at

17
Q

Define Marginal Cost

A

The cost of producing an additional unit

18
Q

Define Average Revenue

A

The total revenue divided by quantity

19
Q

Define Marginal Revenue

A

The additional revenue gained from selling an additional unit