Economics Chapter Seven

Price-fixing

Agreement, usually illegal, by firms to charge a uniform price for a product.

Collusion

Agreements, usually illegal, among producers to fix prices, limit output, or divide markets.

Positive externality

Beneficial side effect that affects an uninvolved third party.

Nonprice Competition

Competition involving the advertising of a product's appearance, quality, or design, rather than its price.

Public goods

Economic product that is consumed collectively; highways, national defense, police and fire protection.

Externality

Economic side effect that affects an uninvolved third party.

Negative exernality

Harmful side effect that affects uninvolved third party; external cost

Economies of scale

Increasingly efficient use of personnel, plant, and equipment as a firm becomes larger.

Market Structure

Market classification according to number and size of firms, type of product, and type of competition.

Technological Monopoly

Market situation where a firm has a monopoly because it owns or controls a manufacturing method, process, or other scientific advance.

Geographic Monopoly

Market situation where a firm has a monpoly because of its location or the small size of the market.

Perfect competition

Market structure characterized by a large number of well-informed independent buyers and sellers who exhange identical products

Monopolistic competition

Market structure having all conditions of pure competition except for identical products; form of imperfect competition

market failure

Market where any of the requirements for a competitive market-adequate competition, knowledge of prices and opportunties, mobility of resources, and competitive profits-are lacking.

Natural Monopoly

Market where average costs are lowest when all output is produced by a single firm.

Government Monopoly

Monopoly created and/or owned by the government.

Laissez Faire

Philosophy that government should not interfere with business activity.

Product differentiation

Real or imagined differences between competing products in the same industry.

Public disclosure

Requirement forcing a business to reveal information about its products or its operations to the public.

Trust

illegal combination of corporations or cormpanies organized to hinder competition

price discrimination

illegal practice or charging customers different prices for the same product

Monopoly

market structure characterized by a single producer; form of imperfect condition

Oligopoly

market structure in which a few large sellers dominate and have the ability to affect prices in the industry; form of imperfect competition

Imperfect Competition

market structure where all conditions of pure competition are not met; monopolistic competition, oligopoly, and monopoly

cease and desist order

ruling requiring a company to stop an unfair business practice that reduces or limits competition