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45 Cards in this Set
- Front
- Back
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monoploist
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monopolist
the only firm that produces a good or service for which there are no good substitutes |
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market power (monopoly power)
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market power (monopoly power)
the ability of a producer to raise prices |
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barrier to entry
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barrier to entry
things that prevent other firms from entering into the industry |
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what are the barriers to entry?
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barriers to entry
1.) patents and copyrights 2.) license to operate 3.) control of a resource 4.) returns to scale |
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natural monopoly
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natural monopoly
exists when economies of scale (a range of production in which long-run average total cost declines as output increases) provide a large cost advantage to having all of an industry's output produced by a single firm |
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single-price monopoly
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single-price monopoly
offers its products to all consumers at the same price |
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price-discrimination
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price discrimination
takes place when a monopolist charges each consumer his or her willingness to pay--the maximum that consumer is willing to pay |
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oligopolist
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oligopolist
a producer in an industry with only a small number of producers |
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duopolist
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duopolist
an oligopoly consisting of only two firms, each firm is a duopolist |
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cartel
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cartel
an agreement by several producers that increases their combined profits by telling each one how much to produce |
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interdependence
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interdependence
when the decisions of two or more firms significantally affect each others' profits |
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nash equilibrium (noncooperative equilibrium)
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nash equilibrium (noncooperative equilibrium)
the result when each player in a game chooses the action that maximizes his or her payoff given the actions of the other players, ignoring the effects of his or her action on the payoffs received by those other players |
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collusion
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collusion
sellers engage in collussion when they cooperate to raise each other's profits |
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game theory
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game theory
the study of behavior in situations of interdependence (when the decisions of two firms significantally affect each other's profits) |
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dominant strategy
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dominant strategy
when it is a player's best action regardless of the action taken by the other player |
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monoploist
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monopolist
the only firm that produces a good or service for which there are no good substitutes |
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market power (monopoly power)
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market power (monopoly power)
the ability of a producer to raise prices |
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barrier to entry
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barrier to entry
things that prevent other firms from entering into the industry |
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what are the barriers to entry?
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barriers to entry
1.) patents and copyrights 2.) license to operate 3.) control of a resource 4.) returns to scale |
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natural monopoly
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natural monopoly
exists when economies of scale provide a large cost advantage to having all of an industry's output produced by a single firm |
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single-price monopoly
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single-price monopoly
offers its products to all consumers at the same price |
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price-discrimination
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price discrimination
takes place when a monopolist charges each consumer his or her willingness to pay--the maximum that consumer is willing to pay |
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oligopolist
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oligopolist
a producer in an industry with only a small number of producers |
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duopolist
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duopolist
an oligopoly consisting of only two firms, each firm is a duopolist |
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cartel
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cartel
an agreement by several producers that increases their combined profits by telling each one how much to produce |
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interdependence
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interdependence
when the decisions of two or more firms significantally affect each others' profits |
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nash equilibrium (noncooperative equilibrium)
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nash equilibrium (noncooperative equilibrium)
the result when each player in a game chooses the action that maximizes his or her payoff given the actions of the other players, ignoring the effects of his or her action on the payoffs received by those other players |
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collusion
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collusion
sellers engage in collussion when they cooperate to raise each other's profits |
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game theory
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game theory
the study of behavior in situations of interdependence (when the decisions of two firms significantally affect each other's profits) |
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dominant strategy
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dominant strategy
when it is a player's best action regardless of the action taken by the other player |
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monopolistic competition
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monopolistic competition
a market structure in which there are many competing producers in an industry, each producer sells a differentiated product, and there is free entry into and exit from the industry in the long run |
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product differeniation
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product differentiation
when goods that are close substitutes are altered so that they differ in a minor way (to create brand loyalty) |
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what are ways to differentiate a product?
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what are ways to differentiate a product
1.) advertising 2.) location 3.) quality |
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externalities
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externalities
external costs and benefits |
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negative externalities
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negative externalities
external costs (occurs when the bi-product is viewed as having a social cost) |
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marginal social cost
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marginal social cost
the additional cost imposed on society as a whole by an additional unit |
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pigouvian taxes
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pigouvian taxes
taxes designed to reduce external costs |
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positive externalities
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positive externalities
external benefits (occurs when the bi-product is viewed as having social benefit) |
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marginal social benefit
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marginal social benefit
the additional gain to society as a whole from an additional unit |
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public good
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public good
a good that is both nonexcludable (consumption can't be prevented by supplier) and nonrival (can be consumed by more than one person at the same time) |
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rival
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rival
a good is rival if the same unit of the good cannot be consumed by more than one person at the same time |
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excludable
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excludable
a good is excludable if the supplier of that good can prevent people who do not pay for the good from consuming it |
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free rider
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free rider
individuals who have no incentive to pay for their own consumption and instead will take a "free ride" on anyone who does pay (goods that are nonexcludable suffer from this) |
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nonrival
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nonrival
a good is nonrival if more than one person can comsume the same good at the same time |
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nonexcludable
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nonexcludable
a good is nonexcludable if the supplier cannot prevent consumption by people who do not pay for it |
