4.1.5 Market Structures Flashcards
Define Oligopoly
An industry dominated by a few large firms
Define Concentration Ratio
The percentage of market share taken up by the biggest firms
Define Profit Maximisation
Firms attaining the highest level of profit where Marginal Cost = Marginal Revenue (MC=MR)
Define Monopolistic Competition
A market structure where many firms selling slightly differentiated products
Define Cartels
When a few large producers agree to cooperate with each other in terms of pricing
Define Collusion
When firms agree to fix the price in order to maximise producer welfare
Define Price Discrimination
When producers sell the same product to different consumers at different prices depending on elasticities of demand
Define Creative Destruction
The innovative mechanism which states that new production units replace old out-dated ones
Define Contestable Markets
A market where there are no entry and exit costs and no sunk costs
Define Static Efficiency
A combination of productive and allocative efficiency. Where we look at a specific snapshot of a firms output level
Define Dynamic Efficiency
When firms use supernormal profits to invest in innovative measures such as research and development
Define Allocative Efficiency
The optimal distribution of goods and services taking consumer preferences into account
Define Productive Efficiency
The production of maximum output with minimum costs.
Define X Inefficiency
When firms lack the incentives to cut their costs
Define Consumer Surplus
The difference between the price that a consumer is willing to pay and the price that the consumer actually pays
