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| Monopoly | A market structure in which one firm is the sole producer of a good with no close substitutes in a market with entry barriers. |
| Barrier to Entry | Something that prevents other firms from entering an industry. Typical barriers include economies of scale, control over scarce inputs, technological superiority, and barriers created by government. |
| Patent | A temporary monopoly given by the government to an inventor for the use or sale of an invention. |
| Market Power | The ability to set the price above the perfectly competitive level. |
| Natural Monopoly | The case where economies of scale are so extensive that it is less costly for one firm to supply the entire range of demand than for multiple firms to share the market. |
| Imperfect Competition | A market structure in which firms have market power to affect prices. |
| Monopolistic Competition | A market structure characterized by a few small firms producing a differentiated product with easy entry into the market. |
| Product Differentiation | The strategy of creating real or perceived differences in a firm's product in order to increase sales. |
| Nonprice Competition | Competition occurs between firms in areas not related to price. These areas can include advertising, new product features, or research. |
| Oligopoly | A very diverse market structure characterized by a small number of interdependent large firms, producing either a standardized or differentiated product in a market with a barrier to entry. |
| Interdependence | The relationship among firms when their decisions significantly affect one another's profits. A key characteristic of oligopolies. |
| Four-firm Concentration Ratio | The sum of the market share of the four largest firms in an industry. |
| Market Share | The fraction of the total industry output accounted for by a given firm's output. |
| Noncollusive Oligopoly | Models of industries in which firms are competitive rivals seeking to gain at the expense of their rivals. |
| Nash Equilibrium | In game theory, the equilibrium that results when all players choose the action that maximizes their payoffs, given the actions of other players. |
| Prisoners' Dilemma | A game where the two rivals achieve a less desirable outcome because they are unable to coordinate their strategies. |
| Dominant Strategy | A strategy that is always the best strategy to pursue, regardless of what a rival is doing. |
| Collusive Oligopoly | Models where firms agree to work together to mutually improve their situations. |
| Duopoly | An oligopoly consisting of only two firms. |
| Strategic Behavior | Actions taken by a firm that attempt to influence the future behavior of other firms. |
| Cartel | A group of firms that agree to maximize their joint profits rather than compete. |
| The Firm | An organization that employs factors of production to produce a good or service that it hopes to profitably sell. |
| Explicit Costs | Direct costs paid to resource suppliers outside the firm. |
| Implicit Costs | Indirect, nonpurchased, or opportunity costs of resources provided by the entrepreneur. |
| Short Run | A period of time too short to change the size of the plant, but many other more variable resources can be adjusted to meet demand. |
| Long Run | A period of time long enough for the firm to alter all production inputs, including the plant size. |
| Production Function | The mechanism for combining production resources, with existing technology into finished goods and services |
| Fixed Inputs | Production inputs that cannot be changed in the short run. |
| Variable Inputs | Production inputs the firm can adjust in the short run to meet changes in demand for its output |
| Total Fixed Costs | Production costs that do not vary with the level of output |
| Total Variable Costs | Production costs that change with the level of output |
| Total Costs | The sum of total fixed and total variable costs at any level of output |
| Marginal Costs | The additional cost of producing one more unit of output |
| Average Fixed Costs | Total fixed costs divided by the level of output |
| Average Variable Costs | Total variable cost divided by the level of output |
| Average Total Cost | Total cost divided by the level of output |
| Economies of Scale | The downward part of the long-run average total cost curve where LRATC falls as plant size increases |
| Perfect Competition | The most competitive market structure is characterized by many small price taking firms producing a standardized product in an industry in which there are no barriers to entry or exit |
| Profit Maximizing Rule | All firms maximize profit by producing where marginal revenue equals marginal cost |
| Factor Markets | Markets in which firms buy the resources they need to produce the goods and services |
| Leisure | The time available for purposes other than working to earn money to buy goods and services |
| Demand for Labor | Shows the quantity of labor demanded at all wages |
| Derived Demand | Demand for a resource arises from the demand for the goods produced by the resource |
| Factors of Production | Natural, Capital, Human and Financial Capital |
| Supply for Labor | Shows the quantity of labor supplied at all wages |
| Human Capital | The skills and knowledge of workers |
| Sole Proprietorship | a business firm owned by one person |
| Partnership | a for-profit business firm owned by two or more people, each of whom has a financial interest in the business |
| Franchise | An authorization granted by a company to an individual or group enabling them to carry out specified commercial activities |
| Cooperative | Co-ops are democratically controlled by their member-owners, and unlike a traditional business each member gets a voice in how the business is run. Services or goods provided by the co-op benefit and serve the member owners. |
| Corporation | a business firm that is itself a legal entity |
| Conglomerate | a single business enterprise formed by combining firms from unrelated industries |
| Limited Liability | a form of legal protection for shareholders and owners that prevents individuals from being held personally responsible for their company's debts or financial losses. |
| Economic Systems | Market, Command, Mixed and Traditional |
| Price Takers | Firms in perfect competition have no incentive to change the price that has been established by the market |
| Federal Trade Commission | protects consumers by stopping unfair, deceptive or fraudulent practices in the marketplace. |
| Horizontal Integration | when a business grows by purchasing its competitors. |
| Vertical Integration | when a business owns all parts of the industrial process |
| Patents | an exclusive right granted for an invention |
| Copyrights | the exclusive legal right, given to an originator or an assignee to print, publish, perform, film, or record literary, artistic, or musical material, and to authorize others to do the same. |
| Trademarks | a symbol, word, or words legally registered or established by use as representing a company or product. |
| Advertising | the activity or profession of producing advertisements for commercial products or services. |
