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Market
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Firms and individuals willing and able to buy or sell a given product
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Market Structure
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The competitive environment
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Potential Entrant
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Person or firm posing a sufficiently credible threat of market entry to affect market price-output decisions
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Product Differentiation
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Real or perceived differences in the quality of goods and services
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Competitive Markets
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Markets characterized by vigorous rivalry among competitors offering essentially the same product
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Barrier to Entry
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Any factor or industry characteristic that creates an advantage for incumbents over new arrivals
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Barrier to Mobility
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Any factor or industry characteristic that creates an advantage for large leading firms over smaller nonleading rivals
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Barrier to Exit
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Any restriction on the ability of incumbents to deploy assets from one industry or line of business to another
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Perfect Competition
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Market characterized by a large number of buyers and sellers of a homogenous product
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Price Takers
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Buyers and sellers that accept market prices as given and devise their buying and selling strategies accordingly
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Normal Profit
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Rate of return necessary to attract and retain capital
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Economic Profit
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An above-normal rate of return
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Economic Loss
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Realized profit that is insufficient to attract and retain capital investment
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Marginal Analysis
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Study of changes caused by economic decisions
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Competitive Firm Short-Run Supply Curve
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The marginal cost curve, so long as P>AVC
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Competitive Firm Long-Run Supply Curve
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The marginal cost curve, so long as P>ATC
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