economics ch 7 vocab

commodity

a product, such as petroleum or milk, that is considered the same no matter who produces or sells it

trust

an illegal grouping of companies that discourages competition, similar to a cartel

merger

when two or more companies join to form a single firm

cartel

a formal organization of producers that agree to coordinate prices and production

oligopoly

a market structure in which a few large firms dominate a market

franchise

a contract that gives a single firm the right to sell its goods within an exclusive market

patent

a license that gives the inventor of a new product the exclusive right to sell it for a specific period of time

monopoly

a market in which a single seller dominates

economies of scale

factors that cause a producer's average cost per unit to fall as output rises

differentiation

making a product different from other similar products

deregulation

the removal of government controls over a market

collusion

an illegal agreement among firms to divide the market, set prices, or limit production

license

a government-issued right to operate a business

perfect competition

a market structure in which a large number of firms all produce the same product and no single seller controls supply or price

natural monopoly

a market that runs most efficiently when one large firm supplies all of the output

government monopoly

a monopoly created by the government

price fixing

an agreement among firms to charge one price for the same good

predatory pricing

selling a product below cost for a short time to drive competitors out of the market

price war

a series of competitive price cuts that lowers the market price below the cost of production

non-price competition

a way to attract customers through style, service, or location, but not a lower price

barrier to entry

any factor that makes it difficult for a new firm to enter a market

imperfect competition

a market structure that fails to meet the conditions of perfect competition

start-up costs

the expenses a new business must pay before it can begin to produce and sell new goods

price discrimination

the division of consumers into groups based upon how much they will pay for a good

market power

the ability of a company to control prices and total market output

monopolistic competition

a market structure in which many companies sell products that are similar but not identical

anti-trust laws

laws that encourage competition in the marketplace