5- Perfect competition, imperfectly competitive markets, and monopoly

Anti-competitive behaviour

Business strategies employed to deliberately limit contestability within markets.

Artificial barrier to entry

Barriers to market entry that are man-made/non-natural.

Break even

The same as normal profit

Cartel

Formed by groups of producers when they illegally decide to collude and not compete.

Collective bargaining

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

Collusion

Illegal coopoeration between multiple firms, forming a cartel.

Concentrated market

A market with very few firms.

Concentration ratio

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

Consumer surplus

Difference between the prices consumers are willing to pay and the prices they actually pay.

Constestability

Ease with which competitors can enter a market.

Deadweight loss

Loss of social welfare derived from economic activity.

Demerger

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

Divorce of ownership and control

The process in which owners become increasingly seperated from those managing the business.

Duopoly

Any market that is dominated by two organisations.

Duospony

Two major buyers of a good or service in a market.

Dynamic efficiency

Improvements to efficiency in the long, brought about by investment into research and development.

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.

Game theory

Where there are twoor more interacting decision makers and different groups of decisions lead to differing outcomes.

Hit and run

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

Imperfect information

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

Innovation

Improving upon an existing product or process.

Interdependence

Where the actions of one firm influence the action of other firms in the market.

Invention

Creation of a new product or process.

Kinked demand curve

Assumes a business may face a dual demand curve for its product based on an oligopoly market structure.

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 amximises their percentage share of the market in which it sells its product.

Market structure

The characteristics of a market.

Merger

Multiple firms uniting to form one larger firm.

Monopoly

Market with only one supplier/one dominant supplier.

monopoly power

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

Monopsony

Market with only one consumer/ one dominant consumer.

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 discrimination

When a firm charges different prices to different groups of consumers for the same good.

Price leadership

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

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.

Price war

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

Principle-agent problem

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

Producer surplus

Difference between the prices producers are willing to accept and the prices they actually accept.

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 the market.

Sales maximisation

When sales revenue is at its highest.

Satisficing

Due to conflicts of interest, managers often run firms to make minimum level of acceptable profit (as specified by owners).

Shareholder

Economic agents concerned on the growth of the firm for monetary reasons.

Stakeholder

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

Static efficiency

Efficiency in the short run.

Takeover

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

Market failure

happens when the price mechanism fails to allocate scarce resources efficiently or when the operation of market forces leads to a net social welfare loss