Econ 304

Front 1

Constant Cost Industry

Back 1

A perfectly competitive industry with a horizontal long-run industry supply curve that results because expansion of the industry causes no change in production cost or resource prices. A constant-cost industry occurs because the entry of new firms, prompted by an increase in demand, does not affect the long-run average cost curve of individual firms, which means the minimum efficient scale of production does not change.

Front 2

reason for constant cost industry

Back 2

increase in demand has no impact on production cost or the long-run average cost curve as new firms entering the industry obtain resources at constant prices

Front 3

Increasing Cost Industry

Back 3

A perfectly competitive industry with a positively-sloped long-run industry supply curve that results because expansion of the industry causes higher production cost and resource prices. An increasing-cost industry occurs because the entry of new firms, prompted by an increase in demand, causes the long-run average cost curve of each firm to shift upward, which increases the minimum efficient scale of production.

Front 4

reason for increasing cost industry

Back 4

increase in demand triggers higher production cost and an upward shift of the long-run average cost curve as new firms entering the industry bid up the prices of key resources

Front 5

Decreasing Cost Industry

Back 5

A perfectly competitive industry with a negatively-sloped long-run industry supply curve that results because expansion of the industry causes lower production cost and resource prices. A decreasing-cost industry occurs because the entry of new firms, prompted by an increase in demand, causes the long-run average cost curve of each firm to shift downward, which decreases the minimum efficient scale of production.

Front 6

reason for decreasing cost industry

Back 6

increase in demand triggers lower production cost and a downward shift of the long-run average cost curve as new firms entering the industry force down the prices of key resources. This could be because a key resource is able to take advantage of economies of scale or decreasing average cost in it is own production and supply

Front 7

Monopoly Power

Back 7

degree of power held by the seller to set the price for a good; downward sloping demand curve

Front 8

Marginal Revenue

Back 8

extra revenue that an additional unit of product will bring.
equivalent to price of product for competitive firms

Front 9

Natural Monopoly

Back 9

where the largest supplier in an industry, often the first supplier in a market, has an overwhelming cost advantage over other actual and potential competitors; industry in which each firm's Average cost curve is decreasing at the point where it crosses market demand

Front 10

First Degree Price Discrimination

Back 10

charging each customer the most that he would be willing to pay for each item that he buys

Front 11

Third Degree Price Discrimination

Back 11

Charging different prices to different markets

Front 12

Two Part Tariff

Back 12

A pricing strategy in which the consumer must pay a fee in exchange for the right to purchase the product

Front 13

Prisoner’s Dilemma

Back 13

fundamental problem in game theory that demonstrates why two people might not cooperate even if it is in both their best interests to do so.

Front 14

Nash Equilibrium

Back 14

An outcome from which nobody would want to deviate taking everyone else's behavior as a given; no player changes strategy because that would mean earning less

Front 15

Monopolistic Competition

Back 15

the theory of markets in which there are similar but differentiated products ie the products are substitutes but not exactly alike; behave like monopolies in short run

Front 16

monopolistic competition examples

Back 16

restraurants, cereals, clothing, shoes

Front 17

monopolistic competition characteristics

Back 17

* There are many producers and many consumers in a given market, and no business has total control over the market price.
* Consumers perceive that there are non-price differences among the competitors' products.
* There are few barriers to entry and exit
* Producers have a degree of control over price.

Front 18

Oligopoly

Back 18

an industry in which individual firms can influence market conditions usually due to a small number of sellers

Front 19

Non-cooperative games

Back 19

players make decisions independently and no communication allowed. Thus, while they may be able to cooperate, any cooperation must be self-enforcing.

Front 20

Sequential games

Back 20

game where one player chooses his action before the others choose theirs. Importantly, the later players must have some information of the first's choice, otherwise the difference in time would have no strategic effect.