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Competition

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Section 1

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Natural barriers to entry

Front

1 / 17

Competition Prep

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Last updated

6 years ago

Date created

Mar 1, 2020

Cards (17)

Section 1

(17 cards)

Natural barriers to entry

Front

These obstacles to new competition occur when existing firms in a market enjoy significant economies of scale.

Back

Price leadership

Front

A pricing strategy in which firms competing to supply a market avoid price competition by setting their prices at or close to those set by the market leader.

Back

Imperfect Competition

Front

A market structure in which numerous firms compete to supply the market with an identical product and have no control over the market price.

Back

Market Structure

Front

The organisational and other characteristics of a market such as the degree of competition or collusion between firms.

Back

Pure Monopoly

Front

A market structure in which one firm is the sole supplier of the product.

Back

Legal Monopoly

Front

An organisation that has the exclusive legal right to provide a particular product. E.g due to having a patent.

Back

X-inefficiency

Front

This occurs when a monopoly has little incentives to control its costs because it does not have to compete with other firms. This causes its average cost of production to be higher than necessary.

Back

Competition policy

Front

Laws and regulations designed to promote competition and to prevent or reduce anti-competitive behaviors.

Back

Natural Monopoly

Front

This occurs when the most efficient number of firms supplying a market is one.

Back

Price War

Front

A period of fierce competition in which competing firms repeatedly try to undercut their rivals prices in an attempt to increase their shares of the market.

Back

Abnormal profit

Front

An excessive or monopoly profit above the level of profit firms would normally earn if the market was competitive one instead.

Back

Cartel

Front

A strategy used by one or more firms in a market to eliminate or prevent competition by cutting prices to a very low level, often below the average costs of competing firms.

Back

Cost plus pricing

Front

A pricing strategy in which the selling price is determined by adding a mark-up for profit to the average cost of production.

Back

Price Collusion

Front

Competing firms working together, often illegally, to control or fix their prices usually at artificially high levels.

Back

Contestable Market

Front

A market which has no or low barriers to entry so that new firms can come into the market to compete existing firms.

Back

Penetration Pricing

Front

A pricing strategy designed to quickly attract costumers to a new or redesigned product by initially setting price low.

Back

Perfect Competition

Front

Any market structure in which firms are able to differentiate their products from those of their rivals and therefore have some degree of control over the market price of their products.

Back