Section 4 - Market Structures Flashcards
Perfect competition
A description of how a market would work if certain conditions were satisfied
Perfect information for consumers
Perfect knowledge of all goods and prices in a market
Perfect information for producers
Perfect knowledge of the market and production methods
Allocative efficiency
When a good’s price is equal to what consumers want to pay for it
Productive efficiency
Ensuring the costs of production are as low as they can be
X-efficiency
Measures how successfully a firm keeps its costs down.
X-inefficiency
Production costs could be reduced at that level of production
Dynamic efficiency
Improving efficiency in the long term; refers to the willingness and eagerness of firms
Internal market
Where different parts of the same organisation compete against each other
Barrier to entry
Any potential difficulty or expense a firm might face if it wants to enter a market
Incumbent firms
Firms that are already in the market
Predatory pricing
Incumbent firms lowering prices to a level that drive entrants out of business
Monopoly (pure monopoly)
A market with only one firm in it
Monopsony
A situation when a single buyer dominates a market
Price discrimination
When a seller charges different prices to different customers for exactly the same product
Consumer surplus
The difference between the actual selling price of a product and the price a consumer would have been willing to pay