perfect competition, imperfectly competitive market and monopoly

Question 1

anti-competitive behaviour

Answer 1

Business strategies employed to limit contest ability deliberately within markets

Question 2

Artificial barrier to entry

Answer 2

Barriers to market entry that are man-made (non-natural)

Question 3

break even

Answer 3

the same as normal profit

Question 4

collective bargaining

Answer 4

When the members of a union act as a unit to increase bargaining power when negotiation with employers

Question 5

collusion

Answer 5

illegal cooperation between multiple firms, forming a cartel

Question 6

concentrated market

Answer 6

a market with very few firms

Question 7

concentration ratio

Answer 7

Shows market dominance by a few firms based on their combined market share.

Question 8

consumer surplus

Answer 8

difference between the prices consumers are willing ton pay and the prices they actually pay

Question 9

contestability

Answer 9

Ease with which competitors can enter a market

Question 10

deadweight loss

Answer 10

Loss of social welfare derived from economic activity

Question 11

demerger

Answer 11

When a firm sells parts of its business to create separate smaller firms

Question 12

divorce of ownership and control

Answer 12

the process In which owners become increasingly separated from those managing the business

Question 13

duopoly

Answer 13

any market that is dominated by two organisations

Question 14

duopsony

Answer 14

two major buyers of a good or service in a market

Question 15

dynamic efficiency

Answer 15

improvements to efficiency in the long run, brought about by investment into research and development

Question 16

entry barrier

Answer 16

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

Question 17

exit barrier

Answer 17

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

Question 18

game theory

Answer 18

Strategic interaction study.

Question 19

hit and run

Answer 19

firms enter a market., make supernormal profits, then leave; possible due to low barriers to entry and exit

Question 20

imperfect competition

Answer 20

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

Question 21

innovation

Answer 21

improves upon an existing product or process

Question 22

interdependence

Answer 22

where the actions of one firm influence the actions of other firms in the market

Question 23

invention

Answer 23

creation of a new product or process

Question 24

kinked demand curve

Answer 24

assumes a business may face a dual demand curve for its product based on the oligopoly market structure

Question 25

limit pricing

Answer 25

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

Question 26

market share maximisation

Answer 26

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

Question 27

market structure

Answer 27

the characteristics of a market

Question 28

merger

Answer 28

multiple firms uniting to form one larger firm

Question 29

monopoly

Answer 29

market with only one supplier/ one dominant supplier

Question 30

monopoly power

Answer 30

the ability to set prices

Question 31

monopsony

Answer 31

market with only one consumer/ one dominant consumer

Question 32

natural barrier to entry

Answer 32

barriers to market entry that are not man-made

Question 33

natural monopoly

Answer 33

when the ideal number of firms in an industry is 1

Question 34

oligopoly

Answer 34

market dominated by a few firms

Question 35

patent

Answer 35

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

Question 36

predatory pricing

Answer 36

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

Question 37

price competition

Answer 37

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

Question 38

price discrimination

Answer 38

when a firm changes different prices to different groups of consumers for the same good

Question 39

price leadership

Answer 39

the dominant firm in the market sets the price and less dominant firms alter their prices accordingly

Question 40

price maker

Answer 40

a firm with monopoly power; ability to set prices

Question 40

price taker

Answer 40

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

Question 41

principle-agent problem

Answer 41

where those in control of a firm (agents) act in their own best interest, rather than that of the owners (principles)

Question 41

price war

Answer 41

where multiple firms cut prices, each firm trying to undercut its competitors and gain market demand

Question 42

producer surplus

Answer 42

Extra profit from selling above minimum price.

Question 43

product differentiation

Answer 43

differences between multiple similar goods and services

Question 44

profit maximisation

Answer 44

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

Question 45

pure monopoly

Answer 45

only one firm in a market

Question 46

sales maximisation

Answer 46

when sales revenue is at its highest

Question 47

satisficing

Answer 47

Acceptably satisfying, not optimally perfect.

Question 48

shareholder

Answer 48

economic agents concerned on the growth of the firm for monetary reasons

Question 49

stakeholder

Answer 49

economic agents concerned on the growth of the firm for not necessarily monetary reasons

Question 50

static efficiency

Answer 50

efficiency in the short run

Question 50

takeover

Answer 50

when a firm buys another firm, with the latter becoming part of the former