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AQA Economics Unit 3 Chapter 4: The Theory of Monopoly
Key definitions
17
Economics
12th Grade
05/22/2014

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Term
Barriers to entry
Definition
Obstacles that stop new firms entering a market.
Term
X-inefficiency
Definition
Not reducing costs to their lowest level - the gap between the actual and lowest possible cost.
Term
Patent laws
Definition
A grant of temporary monopoly rights over a new product.
Term
Copyright
Definition
Ownership of rights, giving redress at law for copying by a third party.
Term
Nationalised
Definition
Taking a firm/industry into public ownership.
Term
Incumbent
Definition
Existing firm(s) in the industry.
Term
Limit pricing
Definition
Setting a price so low that other firms will not enter the industry.
Term
Sunk costs
Definition
Irretrievable costs that occur when a firm exits an industry.
Term
Legal monopoly
Definition
A firm with 25% or more of the market share.
Term
Product differentiation
Definition
A way of distinguishing a product from that of competitors.
Term
Marginal cost pricing
Definition
Setting the price at the level of marginal cost.
Term
Average cost pricing
Definition
Setting the price at the level of average cost.
Term
Dead-weight welfare loss
Definition
Reduction in consumer and producer surplus when output is restricted to less than optimum level.
Term
Price discrimination
Definition
Where an identical good/service is sold to different consumers at different prices for reasons not associated with costs.
Term
First degree price discrimination
Definition
When the discriminating firm can charge different prices to each individual customer.
Term
Second degree price discrimination
Definition
When the discriminating firm can charge different prices to different groups of customers.
Term
Third degree price discrimination
Definition
When the discriminating firm can charge different prices in different countries.
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