9.5: Key Terms
- Page ID
- 215649
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- Allocative Efficiency
- Producing the optimal quantity of output where the marginal benefit to society equals the marginal cost.
- Barriers to Entry
- Legal, technological, or market forces that discourage or prevent potential competitors from entering a market.
- Copyright
- A form of legal protection that prevents unauthorized copying of original works of authorship, such as books and music.
- Deregulation
- Removing government controls over prices and quantities in certain industries.
- Intellectual Property
- The body of law including patents, trademarks, copyrights, and trade secrets that protects inventors and creators.
- Legal Monopoly
- A monopoly created through legal restrictions on competition, such as patents or regulated monopolies.
- Marginal Profit
- The profit from producing and selling one additional unit of output, calculated as marginal revenue minus marginal cost.
- Monopoly
- A market structure in which a single firm produces all of the output in a market.
- Natural Monopoly
- A situation in which economic conditions, such as economies of scale, limit effective competition.
- Patent
- A government-granted legal right allowing an inventor exclusive use, production, or sale of an invention for a limited time.
- Predatory Pricing
- A strategy in which an existing firm temporarily cuts prices sharply to discourage or eliminate competitors.
- Trade Secrets
- Methods of production or business practices kept confidential by a firm.
- Trademark
- An identifying symbol, name, or design that distinguishes a firm's goods or services.
- Acquisition
- When one firm purchases another firm.
- Antitrust Laws
- Laws that allow governments to block certain mergers and, in some cases, break up large firms.
- Bundling
- A practice in which multiple products are sold together as a single package.
- Concentration Ratio
- A measure of market concentration based on the share of industry sales accounted for by the largest firms.
- Cost-Plus Regulation
- A regulatory approach that allows a firm to cover costs and earn a normal profit.
- Exclusive Dealing
- An agreement requiring a dealer to sell products from only one manufacturer.
- Four-Firm Concentration Ratio
- The percentage of total industry sales accounted for by the four largest firms.
- Herfindahl-Hirschman Index (HHI)
- A measure of market concentration calculated by summing the squared market shares of all firms in an industry.
- Market Share
- The percentage of total sales in a market accounted for by a particular firm.
- Merger
- When two previously separate firms combine into a single firm.
- Minimum Resale Price Maintenance Agreement
- An agreement requiring dealers to sell a product at or above a specified minimum price.
- Price Cap Regulation
- A regulatory system that sets the maximum price a firm can charge over a specified period.
- Regulatory Capture
- A situation in which regulated firms exert significant influence over the rules and agencies intended to regulate them.
- Restrictive Practices
- Business practices that reduce competition without direct agreements to raise prices or reduce output.
- Tying Sales
- A practice requiring customers to purchase one product in order to buy another product.