Key Terms

Key Terms

allocative efficiency
producing the optimal quantity of some output; the quantity where the marginal benefit to society of one more unit just equals the marginal cost
barriers to entry
the legal, technological, or market forces that may discourage or prevent potential competitors from entering a market
a form of legal protection to prevent copying, for commercial purposes, original works of authorship, including books and music
removing government controls over setting prices and quantities in certain industries
intellectual property
the body of law including patents, trademarks, copyrights, and trade secret law that protect the right of inventors to produce and sell their inventions
legal monopoly
legal prohibitions against competition, such as regulated monopolies and intellectual property protection
marginal profit
profit of one more unit of output, computed as marginal revenue minus marginal cost
a situation in which one firm produces all of the output in a market
natural monopoly
economic conditions in the industry, for example, economies of scale or control of a critical resource, that limit effective competition
a government rule that gives the inventor the exclusive legal right to make, use, or sell the invention for a limited time
predatory pricing
when an existing firm uses sharp but temporary price cuts to discourage new competition
trade secrets
methods of production kept secret by the producing firm
an identifying symbol or name for a particular good and can only be used by the firm that registered that trademark