Unit 4 vocab

Pure competition

A market structure characterized by many firms selling identical products, with no single firm able to influence market prices. In pure competition, there are no barriers to entry or exit for firms, leading to an efficient allocation of resources.

Commodity

A basic good used in commerce that is interchangeable with other goods of the same type, often produced in a pure competition market.

Barrier to entry

Obstacles that make it difficult for new firms to enter a market, which can include high startup costs, regulations, or strong brand loyalty of existing firms.

Imperfect Competition

A market structure where firms have some control over pricing due to product differentiation and a limited number of competitors, contrasting with pure competition.

Start up costs

The initial expenses incurred when beginning a new business, including costs for equipment, inventory, licenses, and marketing.

Monopoly

A market structure where a single firm dominates the entire market, controlling prices and supply of a product or service, often due to high barriers to entry for other firms.

Economies of Scale

Cost advantages gained by an increased level of production, leading to lower average costs per unit.

Natural monopoly

A type of monopoly that occurs when a single firm can supply the entire market at a lower cost than multiple firms, typically due to high fixed costs and significant economies of scale.

Governmental monopoly

A type of monopoly that occurs when the government is the sole provider of a particular good or service, often because it is deemed necessary for the public welfare.

Patent

A legal right granted to an inventor, giving them exclusive rights to produce, use, and sell their invention for a certain period of time.

Franchise

A legal authorization granted by a company to an individual or group to operate a business under its brand and sell its products.

Price discrimination

A pricing strategy where identical or similar goods or services are sold at different prices to different consumers, often based on their willingness to pay.

Market Power

The ability of a firm or seller to influence the price of a product or service in the market, often due to a lack of competition.

Non price competition

Strategies used by businesses to attract customers through factors other than price, such as quality, service, or brand loyalty.

Oligopoly

A market structure characterized by a small number of firms whose decisions affect each other, leading to limited competition and the potential for price setting.

Predatory pricing

A strategy where a dominant firm reduces prices to a level that is unsustainably low to drive competitors out of the market or prevent new entrants.

Trust

A combination of firms in an industry to limit competition and control prices.

Merger

The combination of two or more companies into a single entity, often to enhance market share, reduce competition, or achieve synergies.