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