Chapter 6 - Monopolistic Competition And Oligopoly Flashcards
ANY TANGIBLE OR INTANGIBLE FEATURE OF A PRODUCT THAT SETS IT APART FROM OTHER SIMILAR PRODUCTS, RESULTING IN A PREFERENCE FOR THAT PRODUCT AMONG BUYERS
PRODUCT DIFFERENTIATION
WHEN FIRMS PRODUCE AT A HIGHER UNIT COST THAN MINIMUM AVERAGE TOTAL COST (ATC) AT EQUILIBRIUM
EXCESS CAPACITY
AN ECONOMIC PROOF USED TO SHOW THAT IN THE LONG RUN A MONOPOLISTICALLY COMPETITIVE FIRM WILL REALISE ONLY A NORMAL PROFIT BECAUSE THE PROFIT-MAXIMISING OUTPUT WILL OCCUR WHEN ITS DEMEND CURVE IS AT A TANGENT TO ITS AVERAGE TOTAL COST (ATC) CURVE
TANGENCY SOLUTION
THE SITUATION WHEN THE NUMBER OF FIRMS IN AN INDUSTRY IS SO SMALL THAT EACH MUST CONSIDER THE REACTIONS OF RIVALS IN FORMULATING ITS PRICE
OLIGOPOLY
THE COMBINING OF TWO OR MORE COMPETING FIRMS, WITH A RESULTING INCREASE IN SIZE, MARKET SHARE AND ECONOMIC POWER
MERGER
THE PERCENTAGE OF TOTAL INDUSTRY SALES ACCOUNTED FOR BY A GIVEN NUMBER OF THE LARGEST FIRMS IN EACH INDUSTRY
CONCENTRATION RATIO
THE SITUATION WHEN THE FATE OF ONE FIRM LIES PARTIALLY OR WHOLLY WITH THE PERFORMANCE OR DECISIONS OF OTHER FIRMS IN THE SAME INDUSTRY
MUTUAL INTERDEPENDENCE
A TYPE OF FORMAL OR INFORMAL ARRANGEMENT TO COORDINATE PRICING STRATEGIES OR FIX PRICES
COLLUSION
STRATEGIES CHOSEN BY PLAYERS IN A GAME TO MAXIMISE THEIR MINIMUM EXPECTED PAYOFF FROM THE GAME
MAXIMIN STRATEGIES
A DEMAND CURVE FOR A NON-COLLUSIVE OLIGOPOLISTIC BASED ON THE ASSUMPTION THAT RIVALS WILL MATCH PRICE DECREASES AND INGORE PRICE INCREASES
KINKED DEMAND CURVE
A GROUP OF FIRMS THAT AGREE EITHER FORMALLY OR INFORMALLY TO SET PRICES AND OUTPUT LEVELS OF PARTICULAR PRODUCTS AMONG MEMBERS
CARTEL
A TYPE OF ‘GENTLEMENS’S AGREEMENT’ IN WHICH OLIGOPOLISTS AUTOMATICALLY FOLLOW THE PRICE INITIATIVES OF THE DOMINANT FIRM IN AN INDUSTRY
PRICE LEADERSHIP
A FORM OF COLLUSION WHEREBY GROUPS OF FIRMS AGREE VERBALLY TO SET PRICES AND OUTPUT LEVELS OF PARTICULAR PRODUCTS AMONG MEMBERS; USUALLY MADE IN INFORMAL SETTINGS SUCH AS A GOLF COURSE
GENTLEMEN’S AGREEMENT
