Competitive and Concentrated Markets

Question 1

artificial barrier to entry

Answer 1

barriers to market entry that are man made, i.e., non-natural

Question 2

collusion

Answer 2

illegal co-operation between multiple firms, forming a cartel

Question 3

concentrated market

Answer 3

a market with very few firms

Question 4

concentration ratio

Answer 4

the total market share of the leading firms in an industry; these firms output as a percentage of total output

Question 5

entry barrier

Answer 5

make it impossible/more difficult for firms to enter a market

Question 6

exit barrier

Answer 6

make it impossible/more difficult for firms to exit a market

Question 7

imperfect competition

Answer 7

any market structure between the extremes of perfect competition and a pure monopoly

Question 8

innovation

Answer 8

improving upon an existing product or process

Question 9

invention

Answer 9

creation of a new product or process

Question 10

limit pricing

Answer 10

lowering the price of a good or service to around average cost, creating an artificial barrier to entry

Question 11

market share maximisation

Answer 11

when a firm maximises their percentage share of the market in which it sells its product

Question 12

market structure

Answer 12

the characteristics of a market

Question 13

monopoly power

Answer 13

the ability of a firm to be a price maker than a price taker; the ability to set prices

Question 14

natural barrier to entry

Answer 14

barriers to market entry that are not man-made

Question 15

natural monopoly

Answer 15

when the ideal number of firms in an industry is 1

Question 16

oligopoly

Answer 16

market dominated by a few firms

Question 17

patent

Answer 17

government legislation protecting a firms right to be the sole producer of a good

Question 18

predatory pricing

Answer 18

temporarily lowering a goods price below average cost, creating an artificial barrier to entry

Question 19

price competition

Answer 19

reducing the price of a product, thus stripping demand from competitiors

Question 20

price maker

Answer 20

a firm with monopoly power; the ability to set prices

Question 21

price taker

Answer 21

a firm that passively accepts the market price, set by forces beyond the firms control.

Question 22

product differentiation

Answer 22

differences between multiple similar goods and services

Question 23

profit maximisation

Answer 23

occurs where the positive difference between total revenue and total costs is at its highest

Question 24

pure monopoly

Answer 24

only one firm in a market

Question 25

sales maximisation

Answer 25

when sales revenue is at its highest