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

copyright: a form of legal protection to prevent copying, for commercial purposes, original works of authorship, including books and music

deregulation: 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

monopoly: 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

patent: 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

trademark: an identifying symbol or name for a particular good and can only be used by the firm that registered that trademark

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