EPF Unit 1 Notes (Market Structures & Competition) - Vocabulary

Vocabulary flashcards covering key market structures, competition concepts, and regulation terms from EPF Unit 1 notes.

Perfect competition

A market structure with a large number of firms producing essentially the same product; four conditions include many buyers and sellers, identical products, well-informed participants, and free entry and exit.

Direct competition

Competition between two companies that offer similar products or services.

Indirect competition

Competition among firms that sell different types of goods but target the same customer group.

Monopoly

A market with a single supplier due to barriers to entry; can lead to higher prices; can arise from economies of scale, natural monopolies, or government-created monopolies.

Barriers to entry

Obstacles that prevent new firms from entering a market (e.g., high startup costs, legal restrictions) which help sustain monopolies or oligopolies.

Economies of scale

The cost advantage that arises with increased output; high startup costs but average costs fall as production expands, potentially enabling monopoly power.

Natural monopoly

An industry where it is most efficient to have a single provider (often regulated by government); example: public water.

Government monopoly

A monopoly created by the government, often involving patents or exclusive rights lasting around 20 years.

Oligopoly

Market dominated by a few large firms; the four largest usually produce 70–80% of output; significant barriers to entry may exist; collusion can occur.

Price fixing

An agreement by firms to set prices at a certain level, typically above competitive prices.

Cartel

A formal agreement among producers to coordinate prices and production; grants control over a market and is illegal in the United States.

Collusion

Firms working together to limit competition, often via agreements on prices or market sharing.

Monopolistic competition

Many firms compete in an open market with products that are similar but not identical; each firm has a monopoly over its own product.

Differential products

Products that are differentiated by firms (branding, features) allowing firms to maintain some monopoly power over their product.

Regulation

Government rules governing an economy, often to prevent monopolies; includes antitrust enforcement and consumer protections.

Deregulation

Reduction or removal of government regulations to increase competition or efficiency.

Antitrust laws

Laws designed to promote competition and prevent monopolies, mergers, and abusive practices; enforcement is through courts.

Mergers

The combining of two or more businesses; regulators may block to prevent excessive market power.

Patents

Government-granted exclusive rights to an invention, typically lasting 20 years; a common tool in government monopoly contexts.