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22 Cards in this Set
- Front
- Back
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What is a pure monopoly?
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Single seller, unique product and barriers to entry exist.
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What is monopoly?
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one firm is the sole producer or seller of a product that does have close substitutes.
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What is Economies of Scale?
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These exist when average cost falls as output, or the scale of production increases.
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What is price discrimination?
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When it does not charge the same price to all buyers and there are no differences in the cost of providing the output to all buyers.
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What is perfect price discrimination?
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Charging the highest price the market will bear for each unit of output.
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Not an example of barrier to entry?
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The ability to produce a product at a unit cost that is lower than price.
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Monopolist that earns positive economic profit in the short run will:
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earn positive economic profit in the long run if it can maintain barriers to entry, assuming no changes in cost or market demand.
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What type of firms face downward-sloping demand curves?
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Imperfectly competitive markets.
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What is monopolistic competition characterized by?
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many firms, easy entry into the market in the long run, and differentiated products.
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What is oligopoly?
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An industry dominated by a few large firms.
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Oligopolies have:
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barriers to entry, and rely on interdependent decision-making.
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What is interdependent decision-making?
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It means the decisions of one firm affect the decisions of other firms.
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Herfindahl-Hirschman Index (HHI)?
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The sum of the squares of the market shares of each firm in the industry.
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What is a cartel?
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a formal collusive agreement between firms which dictates that each member restrict output in order to keep product price high
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What is Price Leadership?
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implicit collusion that occurs when the dominant firm in the market sets a relatively high product price and other firms follow to avoid a price war
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What is game theory?
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a model that attempts to explain a firm's best strategy, assuming the firm attempts to anticipate how rival firms will react.
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Contestable Markets?
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A model based on the assumption that firms choose a relatively low product price because they believe high profits will attract new entrants into the market.
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What is derived demand?
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It depends on, or is derived from , the demand for the output labor helps produce.
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What is the wage rate?
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An imprortant dertiminant of income to the workers who supply labor services and an important determinant of production costs to the firms who demand labor services.
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What is marginal product? (MP)
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The additional output produced when one more unit of labor is employed.
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What is the Value of Marginal Product? (VMP)
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the addition to the firm's revenue generated by using one more unit of labor.
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Maximum profit is where?
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Where VMP = W.
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