Economics: Market Structure and Production Flashcards

These 50 vocabulary flashcards cover key economic concepts from the lecture notes, including market power, production sectors, productivity, and economies of scale.

Market Concentration

A measure of the extent to which market shares are held by a small number of firms, often used as a proxy for the intensity of competition.

Internal Economies of Scale

Cost savings that arise within a firm due to an increase in size and reduction in wasted capacity, often through increased specialisation.

External Economies of Scale

Cost advantages derived by all firms in an industry due to industry-wide growth and shared infrastructure investment, such as roads or shops.

Barriers to Entry

Structural, strategic, or legal obstacles that make it difficult or impossible for new firms to enter a market and compete with incumbents.

First-mover Advantage

The advantage held by established brands through customer loyalty, brand identity, and locked-in distribution channels.

Predatory Pricing

The illegal practice of temporarily lowering prices below cost to drive competitors out of the market.

Horizontal Integration

Gaining ownership or control over a specific part of the production cycle by acquiring or merging with a direct competitor.

Vertical Integration

Extending control over the full production chain, from raw material supply through to final distribution.

Primary Production

The extraction of natural resources from the earth or sea, carried out by extractive industries like agriculture, mining, and fishing.

Secondary Production

The manufacturing sector involved in transforming raw materials into semi-finished or finished goods, such as car assembly or steel manufacturing.

Tertiary Production

The service sector involving activities that enable goods to reach consumers or serve direct needs, such as retail, banking, and education.

Quaternary Production

An advanced form of the tertiary sector focused on knowledge-based services, information technology, and intellectual activities like R&D.

Comparative Advantage

The economic principle that nations export products they can produce more efficiently to maximise national income.

Collusion

An often illegal agreement between firms to fix prices and divide output to eliminate price competition.

Cartel

A group of firms that coordinate to act as a single producer to fix prices and restrict output to maximise profits.

Price Leadership

A situation where the largest firm in an industry sets a price and smaller firms follow to avoid a price war.

Interlocking Directorships

When individuals sit on the boards of competing companies, allowing firms to align strategies and reduce competition.

Collusive Tendering

A practice where firms coordinate their bids for contracts, allocating work among themselves rather than competing.

Trade and Industry Associations

Groups that may restrict entry to an industry through regulation and act as lobby groups to influence government policy.

Price Discrimination

Charging different prices to different customer groups for the same product based on their willingness to pay.

Product Differentiation

The strategy of designing products to reduce the availability of close substitutes, such as unique mobile phone ecosystems.

Exclusive Dealing

A practice requiring retailers to stock and sell only the firm's products to the exclusion of all others.

Resale Price Maintenance

A practice where a supplier sets the final retail price, prevents price-based competition among retailers.

Allocative Efficiency

Occurs when resources are used to produce the specific combination of goods and services most desired by consumers.

Productive (Technical) Efficiency

Producing the maximum possible output from available resources at the lowest cost, operating on the production possibility frontier.

Diseconomies of Scale

The point where a firm's average cost per unit begins to rise due to fragmented decision-making, communication failures, or cultural clashes.

ACCC

The Australian Competition and Consumer Commission, the primary regulatory body responsible for reducing anti-competitive behaviour.

Business Firm

The basic unit of organised production that purchases factors of production and transforms them into goods or services.

Economic Resources

Inputs necessary for production that are limited in quantity and scarce relative to the demand for them.

Land

All natural resources used in production that are geographically bounded and fixed in supply, such as mineral deposits or farmland.

Labour

The physical and mental human effort used in the production process, limited by population size and workforce participation.

Capital

Man-made goods used to produce other goods and services, such as machinery, tools, and infrastructure.

Enterprise

The ability to combine land, labour, and capital to produce goods, while bearing the risks of the business venture.

Red-Collar Workers

A term describing workers traditionally engaged in the primary production sector (e.g., farming or mining).

Blue-Collar Workers

A term describing manual labour and trades workers traditionally engaged in the secondary production/manufacturing sector.

White-Collar Workers

A term describing professional or office-based workers traditionally engaged in the tertiary (service) sector.

Production

All activity that creates utility during a period or increases the future ability of society to create utility; expressed as $Production = Output$.

Utility

The usefulness or enjoyment a consumer derives from a good or service.

Marginal Utility

The additional satisfaction or enjoyment gained by consuming one extra unit of a good or service.

Law of Diminishing Marginal Utility

The economic principle that as a person consumes more units of a good, the utility of each successive unit tends to fall.

Marginal Analysis

The process of evaluating the effects of consuming or producing one extra unit of a good or service.

Marginal Benefit

The change in total private benefit resulting from the production or consumption of one extra unit.

Marginal Cost

The change in total private cost resulting from the production of one extra unit.

Rational Decision Rule

The assumption that consumers and producers choose options where the marginal benefit equals or exceeds the marginal cost, or where $MB = MC$.

Productivity

The amount of output produced per unit of input over a given period of time, such as $Total\,Output / Number\,of\,Workers$.

Industry

A collection of firms that produce the same type of product or service and compete for the same market share.

Price Maker

A large firm with enough market power to influence or dictate the price of a product, such as major grocery retailers.

Price Taker

A firm that is too small to influence market prices and must accept the price set by the market or dominant firms.

Specialisation

Organising the factors of production so that each factor's role becomes extremely narrow and clearly defined to increase efficiency.

Market Failure

Occurs when the free market allocates resources inefficiently, resulting in a net welfare loss through externalities or abuse of market power.