Micro Economics Definitions .4

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  • Created by: Soph
  • Created on: 03-04-16 18:14
Price Taker
A firm which accepts the ruling market price which is set by market conditions outside its control
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Price Maker
A firm which possesses the power to set the price within the market (Monopolies)
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Perfect competition
A market that displayers these conditions; a large number of buyers and sellers, no single individual can influence the market price, perfect information, homogeneous product
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Competitive market
A market in which firms strive to outdo their rivals
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Concentrated market
A market containing very few firms or only one firm
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Pure monopoly
When there is only one firm in the market
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Monopoly power
The power of a firm to act as a price marker rather than a price taker
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Imperfect competition
Any market structure lying between the extremes of perfect competition and pure monopoly
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Profit maximisation
This occurs when a firm's total sales revenue is furthest above total cost of production
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Entry barrier
These are barriers that make it difficult or impossible for new firms to enter a market
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Exit barrier
These are barriers that make it difficult or impossible for firms to leave a market
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Consumer sovereignty
Consumers are able to collectively determine what is produced in a market
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Producer sovereignty
Produvers or firms in a market determine what is produced and what prices are charged
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Natural monopoly
This is when there is only room in a market to benefit from economies of scale
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Natural barrier to entry
A barrier to market entry which is not man-made
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Artificial barrier to entry
A barrier to entry which is man-made
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Informative advertising
This provides consumers and producers with useful information about goods or services
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Persuasive advertising
This attempts to persuade potential customers that a good or service possesses desirable characteristics that make it worth buying
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Saturation advertising
This is occurs by flooding the market with information and persuasion about a firms product. This a man made barrier to entry as it makes it difficult for smaller firms to compete
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Concentration ratio
This is a ratio which indicates the total market share of a number of leading firms in a market
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Oligopoly
A market dominated by a few firms
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Resource misallocation
This is when resources are allocated in a way which does not maximise economic welfare
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Price competition
Reducing the price of a good or service to gain sales by making it more attractive for consumers
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Limit pricing
Reducing the price of a good to just above average cost to deter the entry of new firms into the market as the price levels are unprofitable for potential entrants
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Predatory pricing
Reducing the price of a good to just below average cost to drive smaller firms out of the market
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Other cards in this set

Card 2

Front

A firm which possesses the power to set the price within the market (Monopolies)

Back

Price Maker

Card 3

Front

A market that displayers these conditions; a large number of buyers and sellers, no single individual can influence the market price, perfect information, homogeneous product

Back

Preview of the back of card 3

Card 4

Front

A market in which firms strive to outdo their rivals

Back

Preview of the back of card 4

Card 5

Front

A market containing very few firms or only one firm

Back

Preview of the back of card 5
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