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59 Cards in this Set

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  • Back
Oligopoly
a market structure in which a small number of interdependent firms compete
Three barriers of entry of oligopoly
economies of scale, ownership of a key input, and government-imposed barriers
Economies of scale
when a firm's long-run average costs fall as it increases output
Patent
the exclusive right to a product for a period of 20 years from the date the product was invented
Game Theory
in economics, the study of the decisions of firms in industries where the profits of each firm depend on its interactions with other firms
Three characteristics of game theory
-rules that determine what actions are allowable
-strategies that players employ to attain the objectives in the game
-payoffs that are the results of the interaction among the players' strategies
Business strategy
actions taken by a firm to achieve a goal such as maximizing profits
Payoff Matrix
a table that shows the payoffs that each firm earns from every combination of strategies by the firms
Collusion
an agreement among firms to charge the same price, or otherwise not to compete
Cooperative equilibrium
an equilibrium in a game in which players cooperate to increase their mutual payoff
Noncooperative equilibrium
an equilibrium in a game in which players do not cooperate but pursue their own self-interest
Prisoner's dilemma
a game where pursuing dominant strategies results in noncooperation that leaves everyone worse off
Name oligopolic industries in the United States
discount department stores, college bookstores, athletic footwear stores, radio and television stores, pharmacies and drugstrores, cigarettes, beer, aircraft, cars, cereal, computers
Monopoly
the only seller of a good or service that does not have a close substitute
Four barriers of entry of monopoly
government blocks the entry of more than one firm into a market, one firm has the control of a key raw material necessary to produce a good, there are importatnt network externalities in supplying the good or service, economies of scale are so large that one firm has a natural monopoly
Network externalities
exists when the usefulness of a product increases with the number of consumers who use it
Natural monopoly
a situation in which economies of scale are so large that one firm can supply the entire market at a lower average total cost than can two or more firms
Horizontal merger
a merger between firms in the same industry
Vertical merger
a merger between firms at different stages of production of a good
Arbitrage
Buying a product in one market at a low price and reselling it in another market at a high price
Price discrimination
charging different prices to different customers for the same product when the price differences are not due to differences in cost
Requirements for Price Discrimination
A firm must possess market power; some customers must be more willing to pay for the product than other customers and firms must know what prices they are willing to pay; the must be able to divide up the market for the product so that consumers who buy the product at a low priece are not able to resell it at a high price.
Derived demand
the demand for a factor of production that is derived from the demand for the good the factor produces
Five variables that casue labor demand curve to shift
increase in human capital, changes in technology, changes in the price of the product, changes in the quantity of other inputs, changes in the number of firms in the market
Three factors that increase labor supply curve
increase in population, change in demographics, change in alternatives
Compensating differentials
higher wages that ompensate workers for unpleasant aspects of a job
Labor Union
an organization of employees that has the lehal right to bargain with employers about wages and working componenets
Personal economics
the application of economic analysis to human resources issues
Monospony
the sole buyer of a factor of production
Microeconomics
the study of how households and firms make choices, how they interact in markets, and how the government attempts to influence their choices
Macroeconomics
the study of the economy as a whole, including topics such as inflation, unempoloyment, and economic growth
Business cycle
alternating periods of economic expansion and economic recession
Expansion
the period of a business cycle dure which total production and total employment are increasing
Recession
the period of a business cucle during which total production and total employment are dcreasing
Economic growth
the ability of an economy to produce incrasing quantities of goods and services
Inflation rate
the percentage increase in the price level from one year to the next
Gross Domestic Product (GDP)
the market value of all final goods and services produced in a country during a period of time
Final good or service
a good or service purchased by a final user
Intermediate good or service
a good or service that is an input into another good or service, such as a tire on a truck
Government purchases
spending by federal, state, and local governments on goods and services
Underground economy
buying and selling of goods and services that is concealed from the government to avoid taxes or regulations or because the goods and services are illegal
Three reasons why GDP cannot properly measure well-being
-the value of leisure is not included in GDP
-GDP is not adjusted for pollution or other negative effects of produciton
-GDP is not adjusted for changes in crime and other social problems
Real GDP
the value of final goods and services evaluated at base year prices
Nominal GDP
the value of final goods and services evaluated at current year prices
Unemployment rate
the percentage of the labor force that is unemployed (number of unemployed/labor force)/100 = unemployment rate
Discouraged workers
people who are available for work but have not looked for a job during the pervious four weeks because they believe no jobs are available for them
Labor force participation rate
the percaentage of the working-age population in the labor force
Three types of unemployment
frictional, structural, cyclical
Frictional unemployment
short-term unemployment arising from the process of matching workers with jobs
Structural unemployment
unemployment arising from a persistent mismatch between the skills and characteristsics of workers and the requirements of jobs
Cyclical unemployment
unemployment caused by a business cycle recession
Full employment
when the only remaining unemployment is structural and frictional unemployment
Natural rate of unemployment
the normal rate of unemployment, consisting of structural unemployment plus frictional unemployment
Labor Union
an organization of workers that bargains with emplouers for higher wages and better working conditions for its members
Efficiency wage
a higher-than-market wage paid by a firm to increase worker productivity
Nominal interest rate
the stated interest rate on a loan
Real interest rate
the nominal interest rate minus the inflation rate
Long-Run economic growth
the process by which rising productivity increases the average standard of living
Capital
manufactured goods that are used to produce other goods and services