Economics Chapter 9: Market Structure and Competition
Barrier to entry
A condition that prevents a new firm from entering an industry and competing on an equal basis with established firms
Industry
A family of common concerns, a group of businesses that sells a similar product, sells to a certain group of customers, or produces its products in a similar way
Trust
a business combination in which a group of companies in the same industry eliminate the competition by putting their stock into a single account and allowing a manager to look after the Affairs of the group and distribute the profits; an arrangement that gives a person control of property and a charge to manage it for the good of an intended beneficiary
Monopoly
a form of market organization in which there is only one supplier in the industry selling an undifferentiated product
Cartel
a group of producers who cooperate to control the price of their goods
Oligopoly
a market in which only a handful of firms are selling either highly differentiated or undifferentiated products, sellers and buyers are not fully aware of all market information, each brother has a great deal of control over the price, and sellers find it relatively difficult to enter and exit the industry
Legal monopoly
a monopoly in which the government allows one firm an exclusive right to provide a good or service
Natural monopoly
a monopoly that exists because one firm owns or controls 100% of some resource vital to the industry
Anticompetitive takeovers
a situation in which business firms buy out while their firms in their industry to eliminate or reduce competition
Interlocking directorates
a situation that reduces competition in an industry by placing one or more directors are on the boards of competing firms
Collusion
agreement among a small number of producers to reduce their output and increase prices
Duopoly
an oligopoly composed of two business firms
Tight oligopoly
an oligopoly in which the top four firms account for at least 75% of the market sales
Loose oligopoly
an oligopoly in which the top four firms accounts for 50-75% of the industry's total sales
Market
arrangements people have developed for trading with one another
Tying contracts
contracts forced upon smaller companies by the supplier to give exclusive rights to the supplier and thus reduce competition
Synergy
interaction in which the total is greater than the sum of the parts
Differentiated products
products that are different from one form to another
Undifferentiated products
products that are exactly alike from firm to firm
Imperfect competition
the condition of a market in which there are many sellers of slightly differentiated goods, sellers and buyers are reasonably aware of conditions that may affect the market, each seller has some control over his good's price, and sellers find it relatively easy to enter and exit the market
Perfect competition
the condition of a market when there is a very large number of sellers who are selling an identical product, each seller and buyer is perfectly aware of all information about the market, no seller can affect the price, and sellers find it relatively easy to enter and exit the market
Artificial barriers to entry
the prevention of a new firm from entering an industry because of governmental regulations
Price discrimination
the selling of the same goods or services by a business firm to different buyers at different prices
Natural barriers to entry
the situation in which new firms are prevented from entering an industry because other firms already own all a vital natural resource necessary for the business