Economics

Front 1

What is a duopoly?

Back 1

Industry in which there are only 2 producing firms

Front 2

What is a Collusion?

Back 2

Sellers cooperate to raise each other's profits

Front 3

What is a Cartel?

Back 3

An agreement by several producers that increases their combined profits by telling each one how much to produce

Front 4

What are the two effects of producing an additional unit of a good

Back 4

1. A positive quantity effect - one more unit is sold, increasing total revenue by the price at which that unit is sold.
2. A negative price effect - in order to sell one more unit, the monopolist must cut the market price on all units sold.

Front 5

Noncooperative Behavior

Back 5

Each firms acts in their own self interest

Front 6

Oligopoly

Back 6

Industry with only a small number of producers

Front 7

Imperfect Competition

Back 7

No one firm has market power, but producers realize they can affect market prices

Front 8

Game Theory

Back 8

Study of behavior in situations of interdependence

Front 9

Nash Equilibrium

Back 9

Result when each player in a game chooses the action that maximizes his or her payoff given the actions of other players, ignoring the effects of his or her action on the payoffs received by those other players

Front 10

Strategy of Tit for Tat

Back 10

Involves playing cooperatively at first, then doing whatever the other player did in the previous period

Front 11

Tacit Collusion

Back 11

When firms limit production and raise prices in a way that raises each others' profits, even though they have no made any formal agreement

Front 12

Kinked Demand Curve

Back 12

An oligopolist who believes she will lose a substantial number of sales if she reduces output and increases her price but will gain only a few additional sales if she increases output and lowers her price, away from the tacit collusion outcome, faces a kinked demand curve

Front 13

Antitrust Policy

Back 13

refers to the efforts of the government to prevent oligopolistic industries from becoming or behaving like monopolies

Front 14

Price War

Back 14

Occurs when tacit breaks down and prices collapse

Front 15

Marginal social cost of pollution

Back 15

additional cost imposed on society as a whole by an additional unit of pollution

Front 16

marginal social benefit of pollution

Back 16

additional gain to society as a whole from an additional unit of pollution

Front 17

socially optimal quantity of pollution

Back 17

the quantity of pollution that society would choose if all the costs and benefits of pollution were fully accounted for

Front 18

socially optimal point

Back 18

point on graph where the MSC and the MSB lines cross

Front 19

external cost

Back 19

an uncompensated cost that an individual or firm imposes on others

Front 20

external benefit

Back 20

a benefit that an individual or firm confers on others without receiving compensation

Front 21

externalities

Back 21

external costs and benefits

Front 22

negative externalities

Back 22

external costs

Front 23

positive externalities

Back 23

external benefits

Front 24

coase theorem

Back 24

even in the presence of externalities an economy can always reach an efficient solution as long as transaction costs--the costs of individuals of making a deal--are sufficiently low

Front 25

pigouvin taxes

Back 25

taxes designed to reduce external costs

Front 26

Technology spillover

Back 26

external benefit that results when knowledge spreads among individuals and firms

Front 27

marginal social benefit of a good or activity

Back 27

is equal to the marginal benefit that accrues to consumers plus its marginal external benefit

Front 28

pigouvian subsidy

Back 28

a payment designed to encourage activities that yield external benefits

Front 29

industrial policy

Back 29

a policy that supports industries believed to yield positive externalities

Front 30

excludable good

Back 30

the supplier of that good can prevent people who do not pay from consuming it

Front 31

rival in consumption

Back 31

the same unit of the good cannot be consumed by more than one person at the same time

Front 32

nonexcludable

Back 32

supplier cannot prevent consumption by people who do not pay for it

Front 33

nonrival in consumption

Back 33

more than one person can consume the same unit of the good at the same time

Front 34

private goods

Back 34

rival in consumption, excludable

Front 35

artificial scarce goods

Back 35

excludable, nonrival in consumption (pay per view movies, computer software)