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Economics Chapter 4

Terms in this set (27)

Pure competition
also called perfect competition, the market is in equilibrium and all firms sell the same product
commodity
a product that is considered the same regardless of who makes or sells it
barriers to entry
factors that make it difficult for new firms to enter a market
imperfect competition
a market structure that fails to meet the conditions pure competition
start-up costs
the expenses that a new business must pay before it can begin to produce and sell goods
monopoly
forms when barriers prevent firms from entering a market that has a single supplier
economies of scale
characteristics that cause a producer's average cost to drop as production rises
natural monopoly
a market that runs most efficiently when one large firm provides all of the output
government monopoly
a monopoly created by the government
patent
gives a company exclusive rights to sell a new good or service for a specific period of time
franchise
a contract issued by a local authority that gives a single firm the right to sell its goods within an exclusive market
license
grants firms the right to operate a business, especially where scarce resources are involved.
price discrimination
the monopolist may be able to divide consumers into two or more groups and charge a different price to each group
market power
the ability to control prices and total market output
monopolistic competition
many companies compete in an open market to sell products that are similar but not identical
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