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15 Cards in this Set

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Barrier to Entry

Anything that keeps new firms from entering an industry in which firms are earning economic profits.

Business Strategy

Actions that a firm takes to achieve a goal, such as maximizing profits.

Cartel

A group of firms that collude by agreeing to restrict output to increase prices and profits.

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.

Dominant Strategy

A strategy that is best for a firm, no matter what strategies other firms use.

Economies of Scale

The situation when a firm's long-run average costs fall as it increases the quantity of output it produces.

Game Theory

The study of how people make decisions in situations in which attaining their goals depends on their interactions with others; in economies, the study of the decisions of firms in industries where the profits of firm depend on its interactions with other firms.

Nash Equilibrium

A situation in which each firm chooses the best strategy, given the strategies chosen by other firms.

Non-cooperative Equilibrium

An equilibrium in a game in which players do not cooperate but persue their own self-interest.

Oligopoly

A market structure in which a small number of interdependent firms compete.

Patent

The exclusive rights to a product for a period of 20 years from the date the patent is filed with the government.

Payoff Matrix

A table that shows the payoffs that each firm earns from every combination of strategies by the firms.

Price Leadership

A form of implicit collusion in which one firm in an oligopoly announces a price change and the other firms in the industry match the change.

Prisoner's Dilemma

A game in which pursuing dominant strategies results in noncooperation that leaves everyone worse off.