Economics Unit 5 Terms

monopolistic competition

a type of imperfect competition such that many producers sell products that are differentiated from one another (e.g. by branding or quality) and hence are not perfect substitutes.

business franchise

a type of license that a party acquires to allow them to have access to a business's proprietary knowledge, processes and trademarks in order to allow the party to sell a product or provide a service under the business's name.

franchise

a type of license that a party acquires to allow them to have access to a business's proprietary knowledge, processes and trademarks in order to allow the party to sell a product or provide a service under the business's name.

stock

a type of security that signifies ownership in a corporation and represents a claim on part of the corporation's assets and earnings.

cartel

an agreement between competing firms to control prices or exclude entry of a new competitor in a market. It is a formal organization of sellers or buyers that agree to fix selling prices, purchase prices, or reduce production using a variety of tactics.

multinational corporation

an organization that owns or controls production of goods or services in one or more countries other than their home country. It can also be referred as an international corporation

nonprofit organization

an organization with the purpose of which is something other than making a profit. A nonprofit organization is often dedicated to furthering a particular social cause or advocating for a particular point of view.

business license

are permits issued by government agencies that allow individuals or companies to conduct business within the government's geographical jurisdiction. It is the authorization to start a business issued by the local government.

antitrust laws

are statutes developed by the U.S. Government to protect consumers from predatory business practices by ensuring that fair competition exists in an open-market economy.

natural monopoly

distinct type of monopoly that may arise when there are extremely high fixed costs of distribution, such as exist when large-scale infrastructure is required to ensure supply.

limited partnership

exists when two or more partners unite to jointly conduct a business in which one or more of the partners is liable only to the extent of the amount of money that partner has invested.

general partnership

an arrangement by which partners conducting a business jointly have unlimited liability, which means their personal assets are liable to the partnership's obligations.

zoning laws

local government laws that dictate how real property can and cannot be used in certain areas. Zoning laws limit commercial use of land in order to prevent oil, manufacturing or other types of businesses from building in residential neighborhoods.

perfect competition

situation prevailing in a market in which buyers and sellers are so numerous and well informed that all elements of monopoly are absent and the market price of a commodity is beyond the control of individual buyers and sellers.

collusion

takes place within an industry when rival companies cooperate for their mutual benefit.

license

a business arrangement in which one company gives another company permission to manufacture its product for a specified payment .

merger

a corporate strategy of combining different companies into a single company in order to enhance the financial and operational strengths of both organizations.

government monopoly

a form of coercive monopoly in which a government agency or government corporation is the sole provider of a particular good or service and competition is prohibited by law (or public monopoly).

certificate of incorporation

a legal document relating to the formation of a company or corporation. It is a license to form a corporation issued by state government. Its precise meaning depends upon the legal system in which it is used.

corporation

a legal entity that is separate and distinct from its owners. These enjoy most of the rights and responsibilities that an individual possesses; that is, it has the right to enter into contracts, loan and borrow money, sue and be sued, hire employees, own assets and pay taxes.

vertical merger

a merger between two companies that operate at separate stages of the production process for a specific finished product. It occurs when two or more firms, operating at different levels within an industry's supply chain, merge operations.

horizontal merger

a merger occurring between companies in the same industry. It is a business consolidation that occurs between firms who operate in the same space, often as competitors offering the same good or service.

royalties

a payment to an owner for the use of property, especially patents, copyrighted works, franchises or natural resources.

price discrimination

a pricing strategy that charges customers different prices for the same product or service. In pure price discrimination, the seller charges each customer the maximum price that he is willing to pay.

oligopoly

a state of limited competition, in which a market is shared by a small number of producers or sellers.

limited liability corporation

the United States-specific form of a private limited company. It is a business structure that combines the pass through taxation of a partnership or sole proprietorship.

barrier to entry

the existence of high startup costs or other obstacles that prevent new competitors from easily entering an industry or area of business.

liability

the future sacrifices of economic benefits that the entity is obliged to make to other entities as a result of past transactions or other past events, the settlement of which may result in the transfer or use of assets, provision of services or other.

price fixing

the maintaining of prices at a certain level by agreement between competing sellers.

differentiation

the process of distinguishing a product or service from others, to make it more attractive to a particular target market.

deregulation

the reduction or elimination of government power in a particular industry, usually enacted to create more competition within the industry.

sole proprietorship

the simplest business form under which one can operate a business. The sole proprietorship is not a legal entity. It simply refers to a person who owns the business and is personally responsible for its debts.

start-up costs

Non-recurring costs associated with setting up a business, such as accountant's fees, legal fees, registration charges, as well as advertising, promotional activities, and employee training.

conglomerate

a corporation that is made up of a number of different, seemingly unrelated businesses. In it, one company owns a controlling stake in a number of smaller companies, which conduct business separately.

dividend

a distribution of a portion of a company's earnings, decided by the board of directors, to a class of its shareholders. They can be issued as cash payments, as shares of stock, or other property.

trust

a fiduciary relationship in which one party, known as a trustor, gives another party, the trustee, the right to hold title to property or assets for the benefit of a third party, the beneficiary.

price war

a fierce competition in which retailers cut prices in an attempt to increase their share of the market.

patent

a government license that gives the holder exclusive rights to a process, design or new invention for a designated period of time.

cooperative

a jointly owned enterprise engaging in the production or distribution of goods or the supplying of services, operated by its members for their mutual benefit, typically organized by consumers or farmers.

commodity

a marketable item produced to satisfy wants or needs, comprise of goods and services.

nonprice competition

a marketing strategy "in which one firm tries to distinguish its product or service from competing products on the basis of attributes like design and workmanship".

geographic monopoly

A condition that exists in a local area or region wherein one company is the sole provider of a good or service.

assets

Anything tangible or intangible that can be owned or controlled to produce value and that is held to have positive economic value is considered an asset (represent value of ownership that can be converted into cash, or cash itself).

bond

It is a debt security, under which the issuer owes the holders a debt and, depending on the terms of it, is obliged to pay them interest (the coupon) and/or to repay the principal at a later date, termed the maturity date.