CHAPTER 46 MARKET STRUCTURE Flashcards
Barriers to entry
Factors which make it difficult or impossible for firms to enter an industry and compete with existing producers.
Barriers to exist
Factors which make it difficult or impossible for firms to cease production and leave an industry.
Brand
A name, design, symbol or other feature that distinguishes a product from other similar products and which makes it non-homogeneous.
Concentration ratio
The market share of the largest firms in an industry. For instance, a five firm concentration ratio of 60 per cent shows that the five largest firms in the industry have a combined market share of 60 per cent.
Homogeneous goods
Goods made by different firms but which are identical.
Imperfect competition
A market structure where there are several or a relatively large number of firms in the industry, each of which has the ability to control the price that it sets for its products.
Independence
In market theory, when the actions of one firm will have no significant impact on any other single firm in the market.
Interdependence
In market theory, when the actions of one firm will have an impact on other firms in the market.
Limit pricing
When a firm, rather than short run profit maximising, sets a low enough price to deter new entrants from coming into its market.
Market concentration
The degree to which the output of an industry is dominated by its largest producers.
Market share
The proportion of sales in a market taken by a firm or a group of firms.
Market structures
The characteristics of a market which determine the behaviour of firms within the market.
Natural Monopoly
Where economies of scale are so large relative to market demand that the dominant producer in the industry will always enjoy lower costs of production than any other potential competitor.
Non-homogeneous goods
Goods which are similar but not identical made by different firms, such as branded goods.
Perfect knowledge or information
Exists if all buyers in a market are fully informed of prices and quantities for sale, whilst producers have equal access to information about production techniques.
