ECON VOCAB QUIZ #7

Market Structure

The organization of a market, based mainly on the degree of competition. There are four basic market structures.

Market Power

The ability to influence prices--usually by increasing or decreasing the supply of goods.

Perfect Competition

A market structure in which many producers supply an identical product. This is the most efficient structure, with prices set by supply and demand.

Commodity

A product that is exactly the same no matter who produces it.

Price Takers

Producers who must accept, or take, the market price for their product.

Transaction Costs

The costs of shopping around for the best product at the best price.

Barriers to Entry

Obstacles that can restrict access to a market and limit competition.

Start-Up Costs

A barrier/the initial expense of launching a business.

Consumer Sovereignty

In a purely competitive market, the consumer is king.

Imperfect Competition

Any market structure in which producers have some control over the price of their producers.

Monopoly

A market structure in which a single producer supplies a unique product that has no close substitutes.

Price Setters

They can set a price for a product without fear of being undercut by competitors.

Trusts

Combinations of firms, that worked together to eliminate competition and control prices.

Antitrust Laws

Laws that prevent monopolies and promote competition and fairness.

Public Franchise

A contract issued by a government entity that gives a firm the sole right to provide a good or service in a certain area.

License

A legal permit to operate a business or enter a market.

Natural Monopoly

This kind of monopoly arises when a single firm can supply a good or service more efficiently and at a lower cost than two or more competing firms can.

Economies of Scale

The greater efficiency and cost savings that result from increased production.

Oligopoly

A market structure in which a few firms dominate the market and produce similar or identical goods. This structure is more competitive than a monopoly.

Concentration Ratio

The proportion of the total market controlled by a set number of companies.

Price Leadership

The dominant firm sets a price, and the other, smaller firms follow suit.

Price War

Occurs when firms may cut prices to take business away from its competitors or even force them out of business.

Collusion

Occurs when producers get together and make agreements on production levels and pricing.

Cartel

An organization of producers established to set production and price levels for a product.

Monopolistic Competition

A market structure in which many producers supply similar but varied products. This structure is the closest to perfect competition.

Brand

A unique trade name, design, symbol, or feature that identifies a specific product or company and separates it from its competitors.

Brand Loyalty

When customers favor one company over all others.

Product Differentiation

Seek to distinguish their goods and services from those of other firms, even when those products are fairly close substitutes for one another.

Nonprice Competition

Using product differentiation and advertising to attract customers.

Market Share

A firm's proportion of total sales in a market.

Market Failures

A situation in which the market fails to allocate resources efficiently.

Externality

A cost or benefit that arises from production or consumption of a good or service that falls on someone other than the producer or consumer.

Negative Externality

A cost that falls on someone other than the producer or consumer.

Positive Externality

A benefit that falls on someone other than the producer or consumer.

Technology Spillover

Results when technical knowledge spreads from one company or individual to another.

Public Goods

Goods and services that are used collectively and that no one can be excluded from using

Private Goods

Goods and services that are sold in markets.

Excludable

Anyone who does not pay for the good can be excluded from using it.

Nonexcludable

It is not possible to prevent people from using or benefitting from a product or service such as public goods.

Rival in Consumption

A good cannot be consumed by more than one person at the same time.

Nonrival in Consumption

Public goods can be used by more than one person and does not diminish another's ability to use its light as well.

Free-Rider Problem

Occurs when there's no way to make the people who benefit from nonrival and nonexcludable goods pay for them.