Market Structures Flashcards
Competition
The effect of a large number of buyers and sellers acting independently.
Sellers have little or no market power.
Concentration Ratio
Total market share that the biggest firms have:
Oligopoly: 5 firms with more than 50%
Monopoly: 100%
Monopolistic Competition: 10-40%
Cartel (Oligopoly)
A group of stakeholders in the market who collude to improve profits and dominate the market.
There are high barriers to entry and fierce competition between the few firms operating.
Collusion
When firms work together to fix prices/output.
Collusive Oligopoly
A collusion of businesses that operates essentially like a monopoly.
Market Power
The ability of a firm (or group of firms) to raise and maintain prices above the level that would occur under competition.
Monopoly
Market structure that have only one dominant firm, which can set prices for the market.
Monopolistic Competition
A market structure with many relatively small firms that sell slightly differentiated products.
Goods are differentiated by branding, or quality, or differences in service.
Natural Monopoly
A single firm can serve that market at lower cost than any combination of two or more firms. This is because of the large investments needed to provide this good or service, so economies of scale won’t be achieved until much greater levels of output are produced.
Perfect Competition
The large number of firms, complete homogeneity of goods, lack of barriers to entry and exit and the perfect information available about goods means that firms have no price setting ability themselves.
Productively Efficient
When output is produced using the fewest possible amount of resources; when output is produced at the lowest possible cost.
Productivity
The quantity of output per unit of input.
Profit
The money remaining from sales revenue after the costs of production have been subtracted
