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Economics Chapter 5
Vocab Words
16
Economics
Undergraduate 2
09/27/2011

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Term
Perfect Competition
Definition
A situation in which all buyers and sellers in a market are price takers
Term
Competitive Market
Definition
A market which is characterized by perfect competition
Term
Price Takers
Definition
Buyers and sellers who take the market price as given and make their buying and production decisions accordingly
Term
Standardized Product
Definition
Outputs that differ from each other in only a small number of easily identifiable features
Term
New Entrants
Definition
New businesses competing in an existing market, or existing businesses that are expanding into a new market
Term
Barrier to Entry
Definition
Anything that makes it difficult for a new competitor to enter a market
Term
Shutdown Decision
Definition
A business decision to keep operating or not, based on the level of profits
Term
Advertising
Definition
Paid communication with potential customers through public medium such as television, print, or website
Term
Market Structure
Definition
Market classification according to the number of buyers and sellers and the intensity of competition
Term
Monopolistic Competition
Definition
A situation where a market has many sellers with similar but not standardized products
Term
Oligopoly
Definition
A situation where a market has only a small number of sellers producing similar products
Term
Collusion
Definition
An illegal practice in which two or more oligopolists work together to keep the prices of their products artificially high
Term
Implicit Collusion
Definition
Occurs when oligopolists let one company-the market leader- set prices in the market without direct communication
Term
Monopoly
Definition
A situation where a market has only one seller, and buyers have no good alternatives
Term
Natural Monopoly
Definition
An industry in which it may make economic sense to have only one supplier
Term
Market Power
Definition
The ability to raise prices above the level that perfect competition would produce by restricting the quantity supplied
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