Unit 4 - Competitive and concentrated markets

Artificial barrier to entry

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

Collusion

Illegal cooperation between multiple firms, forming a cartel.

Concentrated market

A market with very few (in its most extreme cases, 1) firms.

Concentration ratio

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

Entry barrier

Make it impossible/more difficult for firms to enter a market.

Exit barrier

Make it impossible/more difficult for firms to exit a market.

Imperfect competition

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

Innovation

Improving upon an existing product or process.

Invention

Creation of a new product or process.

Limit pricing

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

Market share maximisation

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

Market structure

The characteristics of a market.

Monopoly power

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

Natural barrier to entry

Barriers to market entry that are not man-made.

Natural monopoly

When the ideal number of firms in an industry is 1.

Oligopoly

Market dominated by a few firms.

Patent

Government legislation protecting a firm's right to be the sole producer of a good.

Predatory pricing

Temporarily lowering a good's price below average cost, creating an artificial barrier to entry.

Price competition

Reducing the price of a product, thus stripping demand from competitors.

Price maker

A firm with monopoly power; the ability to set prices.

Price taker

A firm that passively accepts the market price, set by forces beyond the firm's control.

Product differentiation

Differences between multiple similar goods and services.

Profit maximisation

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

Pure monopoly

Only one firm in a market.

Sales maximisation

When sales revenue is at its highest.