Chapter 22-26 (inclusive)

Question 1

Barriers to entry

Answer 1

obstacles that might discourage a firm from entering a market

Question 2

Competition

Answer 2

the rivalry that exists between firms when trying to sell gods to the same group of customers

Question 3

Innovation

Answer 3

the commercial exploitation of a new invention

Question 4

Product differentiation

Answer 4

an attempt by a firm to distinguish is product from that of rival

Question 5

Backward vertical integration

Answer 5

merging with a firm that operates in the previous stage of production

Question 6

Conglomerate or diversifying merger

Answer 6

the merging of firms involved in completely different business activities

Question 7

Forward vertical integration

Answer 7

merging with a firm that operates in the next stage of production

Question 8

Horizontal integration

Answer 8

the merging with a firm that operates in the next stage of production

Question 9

Lateral integration

Answer 9

the merging of two firms that produce similar goods but are not in competition with each other

Question 10

Merger

Answer 10

the joining together of two or more business- usually to make one new one

Question 11

Organic growth

Answer 11

growth achieved through the expansion of current business activities

Question 12

Takeover

Answer 12

the purchase of one business by another

Question 13

Vertical integration

Answer 13

merging with a firm that operates in a different stage of production

Question 14

Monopoly

Answer 14

a situation where there is one dominant seller in a market

Question 15

Natural monopoly

Answer 15

a situation that occurs when one firm in an industry can serve the entire market at a lower cost than would be possible if the industry were composed of many smaller firms

Question 16

Patent

Answer 16

a license which grants permission to operate as a sole producer of a newly designed product

Question 17

Cartel

Answer 17

where a group of firms or countries join together and agree on pricing or output levels in the market

Question 18

Collusion

Answer 18

informal agreements between firms to restrict competition

Question 19

Interdependence

Answer 19

where the actions of one large firm in an oligopolistic market will have a direct effect on others

Question 20

Niche

Answer 20

a small section in a large market

Question 21

Oligopoly

Answer 21

a market dominated by a few large firms

Question 22

Price wars

Answer 22

where one firm in the industry reduces price causing others to do the same