Competition

Pure Competition

Market with many firms producing identical products.

Conditions for Pure Competition

Four requirements: many buyers/sellers, identical products, informed parties, easy access.

Barriers to Entry

Factors making market entry difficult for new firms.

High Start-Up Costs

Expenses incurred before a firm can produce goods.

Complex Technology

Requires extensive training, creating imperfect competition.

Monopoly

Single seller controls the entire market for a good.

Natural Monopoly

Market efficiently served by one large firm.

Economy of Scale

Cost advantages as production increases.

Government Monopoly

Monopoly created by government establishing barriers.

Patent

Exclusive rights to sell a product for a time.

Franchise

Contract granting exclusive selling rights in a market.

License

Right to operate a business in scarce resource areas.

Antitrust Laws

Laws preventing firms from controlling prices and supply.

Marginal Cost

Cost of producing one additional unit of output.

Marginal Revenue

Additional income from selling one more unit.

Price Discrimination

Charging different prices to different consumer groups.

Targeted Discounts

Discounts aimed at specific consumer segments.

Monopolistic Competition

Many firms sell similar but not identical products.

Non-Price Competition

Competition based on factors other than price.

Oligopoly

Market dominated by a few large, profitable firms.

Price Leadership

Dominant firm sets prices for the industry.

Collusion

Firms working together to set prices illegally.

Cartels

Groups of firms coordinating to control prices.