Chapter 8-9 Pindyck

Question 1

It shows the amount of output that
the industry will produce in the short
run for every possible price

Answer 1

short -run market supply curve

Question 2

measures the sensitivity of industry output to market price

Answer 2

elasticity of market supply

Question 3

the sum over all units produced
of the differences between the
market price of the good and the
marginal cost of production.

Answer 3

producer surplus

Question 4

Refers to an industry where input
prices do not change when
industrial output changes

Answer 4

constant-cost industry

Question 5

refers to industries that exprience an increase in average costs when expanding

Answer 5

increasing-cost industry

Question 6

refers to industries that experience a decrease in average costs when they grow bigger

Answer 6

decreasing-cost industry

Question 7

a situation defined by an inefficient distribution of goods and services in the free market

Answer 7

market failure

Question 8

market wiht only one seller

Answer 8

monopoly

Question 9

-sole producer of a product
-controls the amount of output offered for sale

Answer 9

monopolist

Question 10

the price received per unit sold

Answer 10

average revenue

Question 11

the change in revenue that results from a unit change in output

Answer 11

marginal revenue

Question 12

a market in which there is a single buyer

Answer 12

monopsony

Question 13

a market with only a few buyers

Answer 13

oligopsony

Question 14

ability of a single buyer or a small group of buyers to affect the price of a good or service in a market

Answer 14

monopsony power

Question 15

keep purchasing units of the good until
the last unit purchased gives additional
value, or utility, just equal to the cost of
that last unit

Answer 15

marginal principle

Question 16

the additional benefit from purchasing
one more unit of a good

Answer 16

marginal value

Question 17

the additional cost of buying one more
unit of a good

Answer 17

marginal expenditure

Question 18

priec paid per unit of a good

Answer 18

average expenditure

Question 19

ability of a single seller or a small group of sellers to affect the price of a good or service in a market

Answer 19

monopoly power

Question 20

only a few firms account for most or all of production

Answer 20

oligopolistic market

Question 21

set of strategies or actions in which each firm does the best it can, given its competitors’ actions

Answer 21

nash equilibrium

Question 22

market in which two firms compete with each other

Answer 22

duopoly

Question 23

Firms produce a homogeneous good, and each firm treats the output of its competitors as fixed, and all firms decide simultaneously how much output to produce.

Answer 23

cournot model

Question 24

shows the relationship between
firm’s profit maximizing output and the amount it thinks its competitors will produce.

Answer 24

reaction curves

Question 25

point at which it
indicates that each firm correctly assumes how
much its competitor will produce and sets its
own production level accordingly.

Answer 25

cournot equilibrium

Question 26

An oligopoly model in which one firm sets its output before the other
firms do

Answer 26

stackelberg model

Question 27

The first firm that sets its output first will have the advantage

Answer 27

first mover advantage

Question 28

A model that demonstrates that in a market with homogeneous
products, firms compete by setting prices to maximize profits.
Each firm treats the price of its competitors as fixed, and all firms
decide simultaneously what price to charge

Answer 28

bertrand model

Question 29

It is a game theory example in which two prisoners must decide
separately whether to confess to a crime

Answer 29

prisoner’s dilemma

Question 30

table that shows the
profit (or payoff) to each
firm given its decision and
the decision of its
competitor

Answer 30

payoff matrix

Question 31

Characteristic of oligopolistic markets by which firms
are reluctant to change prices even if costs or
demands change.

Answer 31

price rigidity

Question 32

Oligopoly model in which each firm faces a demand curve
kinked at the currently prevailing price

Answer 32

kinked demand curve model

Question 33

occurs when the demand curve is not a
straight line but has a different
elasticity for higher and lower
prices.

Answer 33

kinked demand curve

Question 34

Form of implicit collusion in which a firm announces a price increase in the hope that other firms will follow suit

Answer 34

price signaling

Question 35

Pattern of pricing in which one firm regularly announces price
changes that other firms then match

Answer 35

price leadership

Question 36

Firm with a large share of total sales that sets price to maximize profits, taking into account the supply response of smaller firms

Answer 36

dominant firm

Question 37

formal agreement between a group of producers of a good or service to control supply or to regulate or manipulate
prices.

Answer 37

cartels

Question 38

differentiation characterized by improvement for same but downgrade for others

Answer 38

horizontal differentiation

Question 39

differentiation characterized by improvement to some but downgrade to others

Answer 39

horizontal differentiation

Question 40

differentiation characterized by being better than other products

Answer 40

vertical differentiation

Question 41

delivers information about products

Answer 41

advertising

Question 42

-refers to the optimal use of resources to produce goods and services that meet consumers’ need and preferences
-produce goods and services at the lowest possible
cost and at the highest possible quality

Answer 42

economic efficiency

Question 43

-a market structure with characteristics of both monopoly and perfect competition
-many firms selling similar but not
identical products, with some degree of market
power, and relatively easy entry and exit

Answer 43

monopolistic competition