Chapter 7 Vocab Flashcards
A market structure in which a large number of firms all produce the same product
Perfect competition
A product that is the same no matter who produces it, such as petroleum, notebook paper, or milk
Commodity
Any factor that makes it difficult for a new firm to enter a market
Barrier to entry
A market structure that does not meet the conditions of perfect competition
Imperfect competition
The expenses a firm must pay before it can begin to produce and sell goods
Start up costs
A market dominated by a single seller
Monopoly
Factors that cause a producers average cost per unit to fall as output rises
Economies of scale
A market that runs most efficiently when one large firm supplies all of the output
Natural monopoly
A monopoly created by the government
Government monopoly
A license that gives the inventor of a new product the exclusive right to sell it for a certain period of time
Patent
The right to sell a good or service within an exclusive market
Franchise
A government issued right to operate a business
License
Division of customers into groups based on how much they will pay for a good
Price discrimination
The ability of a company to change prices and output like a monopolist
Market power
A market structure in which many companies sell products that are similar but not identical
Monopolistic competition
Making a product different from other similar products
Differentiation
A way to attract customers through style, service, or location, but not a lower price
Nonprice competition
A market structure in which a few large firms dominate a market
Oligopoly
A series of competitive price cuts that lowers the market price below the cost of production
Price war
An agreement among firms to divide the market, set prices, or limit production
Collusion
An agreement among firms to charge one price for the same good
Price fixing
A formal organization of producers that agree to coordinate prices and production
Cartel
Selling a product below cost to drive competitors out of the market
Predatory pricing
Laws that encourage competition in the marketplace
Antitrust laws
Like a cartel, an illegal grouping of companies that discourages competition
Trust
Combination of two or more companies into a single firm
Merger
The removal of some government controls over a market
Deregulation
