Key Terms 5 - Perfect Competition, Imperfectly Competitive Markets and Monopoly

Question 1

Market Structure

Answer 1

The organisational and other characteristics of a market.

Question 2

Concentrated Markets

Answer 2

A market containing very few firms, in the extreme only one firm.

Question 3

Monopoly Power

Answer 3

The ability of a monopoly to raise and maintain price above the level that would prevail under perfect competition. Market power can also be exercised, usually to a lesser degree, by firms in oligopoly and monopolistic competition.

Question 4

Monopoly

Answer 4

One firm only in a market.

Question 5

Natural Barriers

Answer 5

Barriers to market entry caused by geography. For example, if one firm has control of a resource essential for a certain industry, other firms are unable to compete in the industry.

Question 6

Artificial Barriers

Answer 6

‘Man-made’ barriers to market entry, e.g. patent protection.

Question 7

Product Differentiation

Answer 7

The marketing of generally similar products with minor variations or the marketing of a range of different products.

Question 8

Concentration Ratio

Answer 8

Measures the market share (percentage of the total market) of the biggest firms in the market. For example, a five-firm concentration ratio measures the aggregate market share of the largest five firms.