Monopoly and Imperfect Competition Vocabulary

Flashcards covering key vocabulary and concepts from the lecture notes on Monopoly and Imperfect Competition.

Monopoly

Market situation where there is a single seller of a product for which there are no close substitutes.

Monopolistic Competition

Market situation where there are many sellers of slightly differentiated products.

Oligopoly

Market situation dominated by a few large firms.

Elasticity of Demand

The responsiveness of quantity demanded to a change in price.

Mutual Interdependence

Businesses are affected by each other’s decisions.

Kinked Demand Curve

Demand curve faced by oligopolies in a market characterized by rivalry.

Price Leadership

When one company initiates a price change and other companies follow.

Collusion

When businesses agree to avoid competition and act together.

Cartel

A formal agreement among firms to fix prices and/or output.

Average-Cost Pricing

Price is equal to average total cost.

Natural Monopoly

A monopoly that arises because a single firm can supply a good or service to an entire market at a smaller cost than could two or more firms.

Game Theory

The study of how interdependent actors achieve their goals through strategy.

Prisoner's Dilemma

A situation in which individually rational behavior leads to a collectively sub-optimal outcome.

Anti-Combines Legislation

Laws aimed at preventing industrial concentration and abuses of market power.

Criminal Offences under the Competition Act

Conspiring with competitors, bid-rigging, predatory pricing, and abuse of dominant position.

Horizontal Merger

A merger between firms in the same industry.

Vertical Merger

A merger between firms at different stages of production.

Conglomerate Merger

A merger between firms in unrelated industries.

Nonprice Competition

Competition based on factors other than price, such as product differentiation and advertising.

Industrial Concentration

Market control by a few large companies.

Concentration Ratios

The percentage of total sales revenue in a market earned by the largest firms.

Wealth Creation

Establishing vigorous import-substituting industries.