Notes

Perfect competition is a market structure in which a large number of firms all produce the same product.
commodity is A product that is the same no matter who produces it, such as petroleum, notebook paper, or milk.
barrier to entry is Any factor that makes it difficult for a new firm to enter a market.
imperfect competiton A market structure that does not meet the conditions of perfect competition.
Start up costs are the expenses a firm must pay before it can begin to produce and sell goods.
monopoly A business that control so much of an industry that little or no competition exists.
economics of scale Factors that cause a producer's average cost per unit to fall as output rises.
natural monopoly A market that runs most efficiently when one large firm supplies all of the output.
govnt monopoly A monopoly created by the government.
patent A patent is a license that gives an inventor the exclusive rights to make, use, or sell an invention for a set period of time.
franchise The right to sell a good or service within an exclusive market.
license A government-issued right to operate a business.
price discrimination Division of customers into groups based on how much they will pay for a good.
market power The ability of a company to change prices and output like a monopolist.
monopolistic competition A market structure in which many companies sell products that are similar but not identical.
differentiation Making a product different from other similar products.
nonprice competition A way to attract customers through style, service, or location, but not a lower price.
oligopoly Oligopoly is a market structure dominated by only a few large profitable firms. In economics, it usually uses the four-firm market ratio (at least four firms control more than 40% of the market).
price war A series of competitive price cuts that lowers the market price below the cost of production.
collusion An agreement among firms to divide the market, set prices, or limit production.
price fixing An agreement among firms to charge one price for the same good.
cartel A formal organization of producers that agree to coordinate prices and production.
market failure A situation in which the market does not distribute resources efficiently.
externality An economic side effect of a good or service that generates benefits or costs to someone other than the person deciding how much to produce or consume.
negative externality Harmful side effect that affects an uninvolved third party; external cost
positive externality Positive externality is a beneficial side effect that affects an uninvolved third party.
public goods. Economic product that is consumed collectively; highways, national defense, police and fire protection.
predatory pricing is selling a product below cost to drive competitors out of the market
anti-trust laws Laws that encourage competition in the marketplace.
trust. A trust like a cartel, an illegal grouping of companies that discourages competition.
merger. Combination of two or more companies into a single firm.
deregulation. The removal of some government controls over a market.