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Harry Bindloss

UNIT 3 ­ Key terms
Allocative Efficiency: Describes the extent to which the allocation of resources matches
consumer preferences. The point where AR=MC.

Backwards vertical merger: A firm merges with a firm closer to the suppliers in a
production process.

Collusion: Occurs when firms make joint agreements to…

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Harry Bindloss

Monopolistic competition: Occurs when there are many firms in the industry, each selling
a slightly differentiated product. One firm's products are not perfect substitutes for
another's so this means that the firms operating in the market are not price takers.

Monopoly: A market in which there is a…

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Harry Bindloss

Takeover: One firm buying/owning a controlling share in another firm. This can be done in a
hostile or a friendly way.

The law of diminishing returns: This states that when increasing quantities of variable
factors are used in combination with a fixed factor initially productivity will rise but…




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