Unit 4 - Competitive and concentrated markets

Artificial barrier to entry: Barriers to market entry that are man-made, i.e., non-natural. Collusion: Illegal cooperation between multiple firms, forming a cartel.. Concentrated market: A market with very few (in its most extreme cases, 1) firms. Concentration ratio: The total market share of the leading firms in an industry; these firms' output as a percentage of total output. Entry barrier: Make it impossible/more difficult for firms to enter a market. Exit barrier: Make it impossible/more difficult for firms to exit a market. Imperfect competition: Any market structure between the extremes of perfect competition and a pure monopoly. Innovation: Improving upon an existing product or process. Invention: Creation of a new product or process. Limit pricing: Lowering the price of a good or service to around average cost, creating an artificial barrier to entry. Market share maximisation: When a firm maximises their percentage share of the market in which it sells its product. Market structure: The characteristics of a market. Monopoly power: The ability of a firm to be a price maker rather than a price taker; the ability to set prices. Natural barrier to entry: Barriers to market entry that are not man-made. Natural monopoly: When the ideal number of firms in an industry is 1.Oligopoly: Market dominated by a few firms. Patent: Government legislation protecting a firm's right to be the sole producer of a good. Predatory pricing: Temporarily lowering a good's price below average cost, creating an artificial barrier to entry. Price competition: Reducing the price of a product, thus stripping demand from competitors. Price maker: A firm with monopoly power; the ability to set prices. Price taker: A firm that passively accepts the market price, set by forces beyond the firm's control. Product differentiation: Differences between multiple similar goods and services. Profit maximisation: Occurs where the positive difference between total revenue and total costs is at its highest. Pure monopoly: Only one firm in a market. Sales maximisation: When sales revenue is at its highest