Definitions-Topic 5: Perfect Competition , Imperfectly Competitve Msrkets And Monopoly

Question 1

Anti-competitive behaviour

Answer 1

Business strategies employed to deliberately limit contest ability within markets

Question 2

Artificial barrier to entry

Answer 2

Barriers to market entry that are man made I.e.non-natural

Question 3

Break even

Answer 3

The same as normal profit

Question 4

Cartel

Answer 4

Formed by groups of producers when they illegally decided to collude and not compete

Question 5

Collective bargaining

Answer 5

When the members of a union act as a unit to increase bargaining power when negotiating with employers

Question 6

Collusion

Answer 6

Illegal cooperation between multiple firms , forming a cartel

Question 7

Concentrated market

Answer 7

A market with very few firms

Question 8

Concentration ratio

Answer 8

The total market share of the leading firms in an industry ; these firms output as a percentage of total output

Question 9

Consumer surplus

Answer 9

Difference between the prices consumers are willing to pay and the prices they actually pay

Question 10

Contestability

Answer 10

Ease with which consumers are willing to pay and the prices hey actually pay

Question 11

Deadweight loss

Answer 11

Loss of social welfare derived from economic activity

Question 12

Demerger

Answer 12

When a firm sells parts of its business to create separate smaller firms

Question 13

Divorce of ownership and control

Answer 13

The process in which owners become increasingly separated from those managing the business

Question 14

Dynamic efficiency

Answer 14

Improvements to efficiency in the long run, brought about by investment into research and development

Question 15

Entry barrier

Answer 15

Make it impossible/more difficult for firms to enter a market

Question 16

Exit barrier

Answer 16

Make it impossible/more difficult for firms to exit a market

Question 17

Game theory

Answer 17

Where there are two or more interacting decision makers and different (groups of) decisions lead to differing outcomes

Question 18

Hit and run

Answer 18

Firms enter a market , make supernormal profits ,then leave , possible due to low barriers to entry and exit

Question 19

Imperfect competition

Answer 19

Any market structure between the extremes of perfect competition and a pure monopoly

Question 20

Innovation

Answer 20

Improving upon an existing product or process

Question 21

Kinked demand curve

Answer 21

Assumes a business may face a dual demand curve for its product based on the oligopoly market structure

Question 22

Limit pricing

Answer 22

Lowering the price of a good or service to around the average cost , creating an artificial barrier to entry

Question 23

Market share maximisation

Answer 23

When a firm maximises their percentage share of the market in which it sells its product

Question 24

Market structure

Answer 24

The characteristics of a market

Question 25

Merger

Answer 25

Multiple firms uniting to form one larger firm

Question 26

Monopoly

Answer 26

Market with only one supplier/one dominant supplier

Question 27

Monopoly power

Answer 27

The ability of a firm to be a price make rather than a price take ; the ability to set prices

Question 28

Monopsony

Answer 28

Market with only one consumer/ one dominant consumer

Question 29

Natural barrier to entry

Answer 29

Barriers to market entry that are not man made

Question 30

Natural monopoly

Answer 30

When the ideal number of firms in an industry is 1