Market Structures

Question 1

Anti competitive behaviour

Answer 1

Business strategies employed to deliberately limit contestability within markets

Question 2

Artificial barrier to entry

Answer 2

Barriers to market entry that are man-made

Question 3

Break even

Answer 3

Same as normal profit

Question 4

Cartel

Answer 4

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

Question 5

Collective bargaining

Answer 5

When the members pf a union act as a unit to increase bargaining power when negotiating 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 process consumers are willing to pay and the prices they actually pay

Question 10

Contestability

Answer 10

Ease with which competitors can enter a market

Question 11

Deadweight loss

Answer 11

Loss of social welfare derived from economic activity

Question 12

Demerger

Answer 12

When a firm dells 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

Duopoly

Answer 14

Any market that is dominated by two organisations

Question 15

Duopsony

Answer 15

Two major buyers of a good or service in a market

Question 16

Dynamic efficiency

Answer 16

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

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

Interdependence

Answer 21

Where the actions of one firm influence the actions of other firms in the market

Question 22

Kinked demand curve

Answer 22

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

Question 23

Limit pricing

Answer 23

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

Question 24

Market share maximisation

Answer 24

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

Question 25

Merger

Answer 25

Multiple firms uniting to form one larger firm

Question 26

Monopoly

Answer 26

Market with only one supplier/ dominant supplier

Question 27

Monopoly power

Answer 27

The ability of a firm to be a price maker rather than being a price taker; the ability to set prices

Question 28

Monopsony

Answer 28

Market with only one consumer/ dominant consumer

Question 29

Natural monopoly

Answer 29

When the ideal number of firms in an industry is 1

Question 30

Oligopoly

Answer 30

Market dominated by a few firms

Question 31

Patent

Answer 31

Government legislation protecting a firm's right to be the sole producer of a good

Question 32

Predatory pricing

Answer 32

Temporarily lowering a good's price below average cost, creating an artificial barrier to entry

Question 33

Price competition

Answer 33

Reducing the price of a product, thus stripping demand from competitions

Question 34

Price discrimination

Answer 34

When a firm chargers different prices to different groups of consumers for the same good

Question 35

Price leadership

Answer 35

The dominant firm in the market sets the price and less dominant firms alter their prices accordingly

Question 36

Price maker

Answer 36

A firm with monopoly power; the ability to set prices

Question 37

Price taker

Answer 37

A firm that passively accepts the market price, set by forces beyond the firm's control

Question 38

Price wars

Answer 38

Where multiple firms cut prices, each firm trying to undercut its competitors and gain market demand

Question 39

Principal-agent problem

Answer 39

Where those in control of a firm (agents) act in their own best interest, rather than that of the owners (principals)

Question 40

Producer surplus

Answer 40

Difference between the prices producers are willing to accept and the prices they actually accept

Question 41

Product differentiation

Answer 41

Differences between multiple similar goods and services

Question 42

Profit maximisation

Answer 42

MR = MC

Question 43

Pure monopoly

Answer 43

Only one firm in the market

Question 44

Sales maximisation

Answer 44

When sales revenue is at its highest

Question 45

Satisficing

Answer 45

Due to conflicts of interests, managers often run films to make the minimum level of acceptable profit

Question 46

Shareholder

Answer 46

Economic agents concerned on the growth of the firm for monetary reasons

Question 47

Static efficiency

Answer 47

Efficiency in the short run

Question 48

Takeover

Answer 48

When a firm buys another firm, with the latter becoming a part of the former