Microeconomics Ch. 16

Front 1

oligopoly

Back 1

product market dominated by a few large firms

Front 2

law of large numbers

Back 2

property of statistics, which says that the average behavior of a large group of firms becomes highly predictable, even if the behavior of individual members of the group is highly unpredictable

Front 3

tacit collusion

Back 3

an implicit agreement among the large corporation in an oligopoly, most often in the form of an agreement not to compete in terms of prices

Front 4

trigger strategy

Back 4

punishment strategy within the context of a tacit collusion to maintain prices above average cost, in which the rival firms threaten to cut their prices to average cost forever if one of the firms cheats on the pricing agreement

Front 5

mark-up pricing

Back 5

rule-of-thumb method of pricing in which a firm sets its price at a constant percentage above its unit or average cost

Front 6

profit satisficers

Back 6

large corporations that are interested in profit only to the point of achieving a satisfactory level of profit and then pursue other objectives

Front 7

market share

Back 7

ratio of a firm's sales (total revenue) to the total industry sales

Front 8

sales maximization

Back 8

goal of maximizing total revenue or sales by producing the output at which marginal revenue is zero