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Econ Ch. 4


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market in which many independent producers compete to sell a standardized product to many independent buyers
pure competition
market characteristic that prevents new firms from entering the market
barrier to entry
firm that is not able to influence its own price
price taker
total revenues minus total costs
minimum profit needed to keep resources invested in a firm (an opportunity cost of production)
normal cost
market in which one firm produces a product with no close substitutes
firm that can influence its own price
price maker
a market in which only a few large firms exist
the existence of only a few relatively large firms in a market
the percentage of output produced by the four largest firms in an industry
concentration ratio
decreasing long-run average costs
economies of scale
the smallest quantity at which the lowest possible average cost is reached
minimum efficient scale
market with significant economies of scale
natural monopoly
governmental monopoly grant, accompanied by regulation
exclusive franchise
barrier to market entry resulting from a monopoly's ownership or control of an entire supply of a resource needed to produce its product
control of essential raw materials
limited-term monopoly grants awarded by the governmnet to encourage innovation and technological change
creation of image on part of consumers that one firm's product is different (superior in some way) from others
product differentiation
permit to operate in a trade or profession
practice whereby established firms take less than the maximum possible profit and thus keep price low enough to retard new entry into their market
limit pricing
price fixing
price-fixing agreement and the firms who are party to it
form of collusion in which firms follow the price increases of a leading firm
price leadership
charging different groups of buyers different price when price differentials arenot justified by cost differences
price discrimination
laws, agencies, and court system established to control monopoly in the United States

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