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| An economic model that allows economists to examine competition among businesses in the same industry | Market structure
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| The ideal model of a market economy | Perfect competition
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| Five characteristics of perfect competition | Numerous buyers and sellers, standardized product, freedom to enter and exit markets, independent buyers and sellers, well-informed buyers and sellers
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| A product that consumers consider identical in all essential features to other products in the same market | Standardized product
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| A business that cannot set the prices for its products but, instead, accepts the market price set by the interaction of supply and demand | Price taker
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| Occurs in markets that have few sellers or products that are not standardized | Imperfect competition
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| Come close to perfect competition | Corn.beef (agricultural products)
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| A market structure in which only one seller sells a product for which there are no close substitutes | Monopoly
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| A formal organization of sellers or producers that agree to act together to set prices and limit output, may function as a monopoly | Cartel
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| A business that does not have to consider competitors when setting its prices | Price maker
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| Something that hinders a business from entering a market | Barrier to entry
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| Examples of barriers to entry | Large size, government regulations, special resources, technology
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| Characteristics of a monopoly | Only one seller, control of prices, restricted/regulated market
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| A market situation in which the costs of production are lowest when only one firm provides output | Natural monopoly
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| A monopoly that exists because the government either owns and runs the business or authorizes only one product | Government monopoly
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| A monopoly that exists because the firm controls a manufacturing method, an invention, or a type of technology | Technological monopoly
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| A monopoly that exists because there are no other producers or sellers within a certain region | Geographic monopoly
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| Example of a natural monopoly | Water company
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| A situation in which the average cost of production falls as the producer grows larger | Economies of sale
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| Example of government monopoly | Postal service
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| Example of technological monopoly | Polaroid
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| A legal registration of an invention or a process that gives the inventor the exclusive property rights to that invention or process for a certain number of years | Patent
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| Example of geographic monopoly | Professional sports
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| One of the most common market structures in which many sellers offer similar, but not standardized, products | Monopolistic competition
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| Example of monopolistic competition | Printed t-shirts
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| Distinguishing features of monopolistic competition | Product differentiation and non-price competition
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| The attempt to distinguish a product from similar products | Product differentiation
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| Example of product differentiation | Gas mileage ratings, batteries
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| Using factors other than low price-such as style, service, advertising, or giveaways- to try to convince customers to buy one product rather than another | Nonprice competition
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| Major characteristics of monopolistic competition | Many buyers for many sellers, similar but differentiated products, limited lasting control over prices, and freedom to enter or exit the market
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| A moderated discussion with small groups of consumers | Focus group
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| A market structure in which only a few sellers offer a similar product, less competitive than monopolistic competition, a few large firms have a late market share and dominate the market | Oligopoly
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| Percent of total sales in a market | Market share
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| Examples of an oligopoly | Movie theaters, breakfast cereal
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| The expenses that a new business must pay to enter a market and begin selling to consumers | Start-up costs
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| Major characteristics of an oligopoly | Few sellers but many buyers, standardized or differentiated products, more control of prices, little freedom to enter/exit market
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| Controlling business behavior through a set of rules or laws to promote competition and protect consumers | Regulation
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| Laws that define monopolies and give government the power to control them and break them | Antitrust legislation
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| A group of firms combined for the purpose of reducing competition in an industry (similar to a cartel) | Trust
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| Keeps trusts from forming, one company combines with or purchases another to form a single firm | Merger
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| Businesses work together to set the prices of competing products | Price fixing
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| Example of price fixing | CDs, FTC ended the anticompetitive price
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| Competing businesses negotiate to divide up a market | Market allocation
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| Setting prices below cost so that smaller producers cannot afford to participate in a market | Predatory pricing
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| A ruling that requires a firm to stop an unfair business practice | Cease and desist order
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| Requires businesses to reveal product information to consumers | Public disclosure
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| Involves actions taken to reduce or remove government oversight and control of business | Deregulation
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| An enterprise that produces goods or provides services | Business organization
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| Most common type of business organization in the US, a business owned and managed by a single person | Sole proprietorship
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| Characteristic of a sole proprietorship, a situation in which a business ceases to exist if the owner dies, retires, or leaves the business for some other reason | Limited life
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| A business owner is responsible for all the losses, debts, and other claims against the business | Unlimited liability
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| Advantages of a sole proprietorship | Easy to open/close, few regulations, freedom and control, owner keeps profits
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| Disadvantages of sole proprietorships | Limited funds, limited life, unlimited liability
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| A business co-owned by two or more people, or "partners" who agree on how responsibilities, profits, and losses will be divided | Partnership
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| Most common type of partnership in which partners share responsibility for managing the business and each one is liable for all business debts and losses | General partnership
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| A partnership in which at least one partner is not involved in day-to-day running of business and is liable only for the funds he or she has invested | Limited partnership
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| A partnership in which all partners are limited partners and not responsible for the debts and other liabilities of other partners | Limited liability partnership
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| Examples of LLP | Medical partnerships, law firms, and accounting firms
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| Advantages of partnerships | Easy to open and close, few regulations, access to resources, joint decision making, specialization
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| Disadvantages of partnerships | Unlimited liability, potential for conflict, limited life
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| A business owned by individuals, called shareholders or stockholders | Corporation
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| Shares of ownership in the corporation | Stock
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| Part of the profit that the company pays out to stockholders | Dividend
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| A corporation that issues stocks that can be freely bought and sold | Public company
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| Retains control over who can buy or sell the stock | Private company
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| Contract the corporation issues that promises to repay borrowed money, plus interest, on a fixed schedule | Bond
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| Occurs in a corporation, business owner's liability for business debts and losses is limited | Limited liability
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| Continue to exist even after a change in ownership | Unlimited life
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| Advantages of corporations | Access to resources, Professional managers, limited inability, unlimited life
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| Disadvantages of corporations | Start-up cost and effort, heavy regulation, double taxation, loss of control
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| The joining of companies that offer the same or similar products or services | Vertical merger
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| The combining of companies involved in different steps of production or marketing of a product or service | Vertical merger
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| Results from a merger of companies that produce unrelated goods or services | Conglomerate
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| A larger corporation with branches in several companies | Multinational corporation
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| Example of a horizontal merger | Reebok and Adidas
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| Example of a vertical merger | Shell Oil and Texaco
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| A business made up of semi-independent businesses that all offer the same products or services | Franchise
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| An individual business that pays a fee to the parent company in return for the right to sell the company's product | Franchisee
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| A type of business operated for the shared benefit of the owners, who are also its costumers | Cooperative
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| An institution that acts like a business organization, but its purpose is usually to benefit society, not to make a profit | Nonprofit organization
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| Require some type of membership payment, keep prices low by purchasing goods in large volumes at a discount price | Consumer/purchasing co-op
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| Business organizations, such as credit unions, that offer their members a service | Service co-op
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| Mainly owned and operated by the producers of agricultural products, join together to ensure cheaper, more efficient processing | Producer co-op
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