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Perfect Competition
Market structure in which a large number of firms all produce the same product.
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Commodity
Product that is the same no matter who produces it, such as petroleum, notebook paper, or milk.
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Barrier to Entry
Any factor that makes it difficult for for a new firm to enter a market.
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Imperfect Competition
A market structure that does not meet the conditions of perfect competition.
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Start-up Costs
Expenses a firm must pay before it can begin to produce and sell goods.
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Monopoly
Market dominated by a single seller.
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Economies of Scale
Factors that cause a producer's average cost per unit to fall as output rises.
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Natural Monopoly
Market that runs most efficiently when one large firm supplies all of the output.
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Government Monopoly
Monopoly created by the government.
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Patent
Licence that gives the inventor of a new product the exclusive right to sell it for a certain period of time.
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Franchise
The right to sell a good or service within an exclusive market.
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License
Government issued right to operate a business.
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Price Discrimination
Division of customers into groups based on how much they will pay for a good.
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Market Power
Ability of a company to change prices and output like a monopolist.
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Monopolistic Competition
Market structure in which many companies sell product that are similar but not identical.
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Differentiation
Making a product different from other similar products.
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Nonprice Competition
Way to attract customers through style, service, or location, but not a lower price.
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Oligopoly
Market structure in which a few large firms dominate a market.
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Price War
Series of competitive price cuts that lowers the market price below the cost of production.
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Collusion
Agreement among firms to divide the market, set prices, or limit production.
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Price Fixing
Agreement among firms to charge one price for the same good.
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Cartel
Formal organization of producers that agree to coordinate prices and production.
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Predatory Pricing
Selling a product below cost to drive competitors out of the market.
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Antitrust Laws
Laws that encourage competition in the marketplace.
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Trust
like a cartel, an illegal grouping of companies that discourages competition.
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Merger
Combination of two or more companies into a single firm.
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Deregulation
Removal of some government controls over a market.
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