Chapter 9 Terms

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market structure

the amount of competition for a good or service

perfect competition

numerous buyers and sellers

\-each seller has some market share

\-no 1 buyer or seller can affect the price

monopoly

a single seller controls the supply in the entire industry for a good or service, and thus sets the price

barriers to entry

obstacles that prevent a competitor from entering the market for a good or service

economies of scale

due to their large size of output, they can produce the good/service for a very low cost

patent

exclusive right to make, use, or sell an invention for a period of years (20 years)

copyright

exclusive right to sell, publish, or reproduce creative works for a period of years (life of the author + 70 years, or 95 years after publication)

oligopoly

an industry dominated by a small number of suppliers who have some control over price

product differentiation

manufacturers’ use of minor differences in quality and features of similar goods and services

interdependence

any change on the part of one firm will cause a reaction on the part of other firms in the oligopoly

collusion

some companies may secretly agree to raise prices

cartel

arrangement among businesses to reduce competition by controlling price, production, and distribution of goods

monopolistic competition

a large number of sellers offer similar but slightly different products and have some control over price

interlocking directorates

a member of a Board of Directors for one company also serves on the Board for a competing company

antitrust legislation

aimed to prevent monopolies from forming and break up current monopolies

merger

legal combination of two or more companies that become one corporation

horizontal merger

merging companies are in the same industry

vertical merger

when companies involved in a “chain of supply” merge together

conglomerate

a large corporation is involved in at least four or more unrelated businesses

deregulation

reduction of government rules and regulations in businesses