(1) Horizontal integration: When 2 firms in the same industry & at the same stage of production process merge
(2) Vertical integration: When 2 firms in the same industry but at different stage of production process merge
(3) Conglomerate integration: When 2 firms in a totally unconnected industry merge
(4) Fixed costs: Costs that do not vary with amount of output produced
(5) Variable costs: Costs that vary with amount of output produced
(6) Average costs (AC): Total costs per unit of output
(7) Marginal costs (MC): An additional cost incurred due to extra one unit of output produced
(8) Average fixed costs (AFC): Total fixed costs per unit of output
(9) Average variable costs (AVC): Total variable costs per unit of output
(10) Marginal revenue (MR): An additional revenue due to extra one unit of output sold
(11) Perfect competition: A market with huge number of sellers, where there is perfect information, firms being price taker, goods produced are identical & there is freedom of entry & exit
(12) Monopoly: A market with only one producer/ Legally a market is considered as monopoly when there is a firm that conquers more than 23% market share
(13) Oligopoly: A market with few large firms & those firms are highly interdependent
(14) Monopolistic competition: A market with many sellers (not as many as in perfect market) & goods produced are identical but differentiated through branding
(15) Revenue maximisation: When firms choose to produce at an output where MR = 0
(16) Sales maximisation: When firms choose to produce at an output where AC = AR
(17) Profit maximisation: When firms choose to produce at an output where MC = MR
(18) Productive efficiency: When firms choose to produce output where long run average costs curve is minimised
(19) Allocative efficiency: A situation where there is optimal allocation of goods & services & it happens where P = MC/ MC = AR
(20) Price discrimination: A practice of selling the same good but different market at different price
(21) Concentration ratio: The percentage of total sales contributed by the top 3 to 5 firms in the industry
(22) Contestable market: A market with low barriers to entry & where costs of exit is low
(23) Sunk costs: Costs that are irrecoverable upon exiting the industry
(24) Predatory pricing: Practice of selling a good at loss making level in order to drive out competitors
(25) Limit pricing: Practice of selling a good at just below the predicted AC curve of potential entrants to make the entrance into the industry not profitable
(26) Restrictive practices: Tactics used by producers to limit amount of competition in the market
(27) Collusion: Collective agreements between producers which restricts competition
(28) Tacit collusion: When firms collude without having any formal agreement been reached or even without any explicit communication between the firms having taking place
(29) Price leadership: When one firm, the price leader sets its own price & other firms in the market se their prices in relationship to the price leader
(30) X-inefficiency: Inefficiency that occurs when a firm fails to minimise its costs of production
(31) Competition Commission: An independent body/ tribunal set up to oversee UK competition policy & enforce the monopolies, mergers & restrictive practice act
(32) Office of Fair Trading (OFT): Established to promote fair competition & deals with violations under monopoly. Mergers & restrictive practices legislation
(33) RPI-X: RPI is retail price index, a measurement of inflation while X is expected fall in costs due to gain in efficiency
(34) RPI+K: RPI is retail price index, a measurement of inflation while K is capital investment requirement
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