Market Structure

The organization of a market, based mainly on the degree of competition- there are four basic market structures

Perfect Competition

A market structure in which many producers supply an identical product.  This is the most efficient structure, with prices set by supply and demand.

Monopoly

A market structure in which a single producer supplies a unique product that has no close substitutes.  In an unregulated monopoly, the producer sets prices.

Oligopoly

A market structrue in which a few firms dominate the market and produce similar or identical goods.  This structrue is more competitve that a monopoly.

Monopolistic Competition

A market structure in which many producers supply similar but varied products.  This structure is closest to perfect competition.

Market Failure

A situation in which the market fails to allocate resources efficiently.

Externality

A cost or benefit that arises from production or consumption of a good or service that falls on someone other than the producer or consumer.

Public Goods

Goods or services that are used collectively and that no one can be excluded from using.  Public goods are not provided by markets.  Examples- national defense and clean air.

Market Power

The ability to influence prices, usually by increasing or decreasing the supply of goods.

Commodity

A product that is exactly the same no matter who produces it.

Price Takers

Producers that must accept, or take, the market price for their product.

Transaction Costs

Economist refer to the costs of shopping around for the best product at the best price.

Barriers to Entry

Obstacles that can restrict access to a market and limit competition.

Start- Up Costs

The initial expense of launching a business.

Imperfect Competition

Any market structure in which producers have some control over the price of theri products.

Prioce Setters

Unlike competative firms, these monopolistic businesses are the opplsite of price takers.

License

A legal permit to operate a business or enter a market.

Collusion

When producers get together and make agreements on production levels and pricing.

Cartel

An organization of producers established to set production and price levels for a product.

Brand

Trade name

Market Share

The proportion of total sales in a market.