Final Flashcards
(30 cards)
Abatement
The ending, reduction, or lessening of something.
Absolute Advantage
One country can produce more of a good than another country
Antitrust (Law)
Laws designed to maintain competition and prevent monopolies from developing.
Autarky
Economic independence or self-sufficiency (Country, state or society that is economically independent).
Barriers to entry
The existance of high start-up costs or other obstacles that prevent new competitors from easily entering an industry or area of business.
Cartel
An agreement between firms (or countries) in an industry to formally collude
Comparative Advantage
One country has a lower opportunity cost of producting a good than another country
Economies of Scale
As a firm’s output increases, its LRATC tends to decline.
Game Theory
An approach to analyzing oligopoly behavior using mathematics and simulation by making different assumptions about the players, time involved, level of information, strategies, and other aspects of the game.
Gini Coefficient
A precise method of measuring the position of the Lorenz curve, defined as the area between the Lorenz curve and the equal distribution line divided by the total area below the equal distribution line.
Herfindahl Index (HHI)
A way of measuring industry concentration, equal to the sum of the squares of market shares for all firms in the industry.
Lorenz Curve
A graphical method of showing the income distribution by comulating families of various income levels on the horizontal axis and relating this to their comulative share of total income on the vertical axis.
Market Power (or monopoly power)
The ability of a firm (or group of firms) to raise and maintain price above the level that would prevail under the competition.
> A firm with monopoly power has some control over price.
Market Structure
The number of firms producing identical products which are homogeneous.
Monopolistic Competition
Involves a large number of small firms and is similar to competition, with easy entry and exit, but unlike the competative model, the firms have differentiated their products.
Monopoly
A one-firm industry with no close product substitutes and with substantial barriers to entry.
Monopsony
A labor market with one employer.
Natural Monopoly
Large economies of scale mean that the minimum efficient scale of operations is roughly equal to market demand.
Oligopoly
A market with just a few firms dominating the industry where (1) each firm recognizes that it must consider its competitors’ reactions when making its own decisions (mutual interdependence), and (2) there are significant barriers to entry into the market
Price Discrimination
Charging different consumer groups different prices for the same product.
First Degree: Requires the monopoly seller of a good or service to know the absolute maximum price that every consumer is willing to pay.
Second Degree: Price varies according to quantity demanded. The larger the quantity being purchased, the lower the price.
Third Degree: Means charging a different price to different consumer groups. Ex: Adults and children ticket prices at a movie theater.
Prisoner’s Dilemma
A noncooperative game where players cannot communicate or collaborate in making their decisions about whether to confess or not, which results in inferior outcomes for both players. (Oligopoly Decisions).
Quota
A gov’t-set limit on the quantity of imports into a country.
Tariff
A tax on imported products.
Mercosur
Customs union of southern countries:
- Argentina
- Brazil
- Paraguay
- Uruguay
