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| Question | Answer |
| Market structure | The organisational and other characteristics of a market. |
| Entry barriers | Obstacles that make it difficult for a new firm to enter a market. |
| Exit barriers | Obstacles that make it difficult for an established firm to leave a market. |
| Natural barriers | Barriers that result from inherent features of the industry, such as economies of scale or high research and development costs. |
| Sunk costs | Costs that have been incurred and cannot be recovered. |
| Artificial barriers | Barriers erected by the firms themselves, such as high levels of advertising expenditure or predatory pricing. |
| Limit prices | Prices set low enough to make it unprofitable for other firms to enter the market. |
| Predatory prices | Prices set below average cost with the aim of forcing rival firms out of business. |
| Product differentiation | The marketing of generally similar products with minor variations or the marketing of a range of different products. |
| Divorce of ownership from control | The owners and those who manage the firm are different groups with different objectives. |
| Satisficing | Achieving a satisfactory outcome rather than the best possible outcome. |
| Monopoly | One firm only in a market. |
| Static efficiency | Efficiency at a particular point in time. |
| Dynamic efficiency | Occurs in the long run, leading to the development of new products and more efficient processes that improved productive and allocative efficiency. |
| Productive efficiency | The level of output at which average costs of production are minimised. |
| Allocative efficiency | Occurs when it is impossible to improve overall economic welfare by reallocating resources between markets. P = MC. |
| Private costs and benefits | Private costs are costs incurred solely by an individual or firm as a result of their own activities; private benefits are benefits enjoyed solely by an individual or firm as a result of their own activities. |
| Social costs and benefits | Social costs are costs which fall on the whole of society: social benefits are benefits enjoyed by the whole of society. |
| Monopoly power | Firms in market structures other than pure monopoly usually possess significant monopoly power; power over price setting and other aspects of the market such as product differentiation. |
| Concentration ratio | Measures the market share of the biggest firms in the market. |
| Market conduct | The price and other market policies pursued by firms. |
| Cartel | A collusive agreement by firms, usually to fix prices or restrict output. |
| Price leadership | The setting of prices in a market, usually by a dominant firm, which is then followed by other firms in the same market. One firm acts as a barometer for others to follow. |
| Price agreement | An agreement between a firm, similar firms, suppliers or customers regarding the pricing of a good or service. |
| Price war | Occurs when rival firms continuously lower prices to undercut each other. |
| Price discrimination | Charging different prices to different customers for the same product or service, with the prices based on different willingness to pay. |
| Consumer surplus | A measure of the economic welfare enjoyed by consumers; surplus utility received over and above the price paid for a good. |
| Producer surplus | A measure of the economic welfare enjoyed by firms or producers; the difference between the price a firm succeeds in charging and the minimum price it would be prepared to accept. |
| Contestable market | A market in which the potential exists for new firms to enter the market. A perfectly contestable market has no entry or exit barriers and no sunk costs, and both incumbent firms and new entrants have access to the same level of technology. |
| Hit-and-run competition | Occurs when a new entrant can hit the market, make supernormal profit and then run, given that there are no or low barriers to exit. |
| Deadweight loss | The name given to the loss of economic welfare when the maximum attainable level of total welfare is not achieved. |
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