Market structure and imperfect competition Key terms Flashcards
An imperfectly competitive firm
faces a down-sloping demand curve. Its output price reflects the quantity of goods it makes and sells.
An oligopoly
is an industry with few producers, each recognizing their interdependence.
An industry with monopolistic competition
has many sellers of products that are close substitutes for one another. Each firm has only a limited ability to affect its output price.
A natural monopoly
enjoys such scale economies that it has no fear of entry by others.
Minimum efficient scale
is the lowest output at which a firm’s LAC curve stops falling.
The N-firm concentration ratio
is the market share of the largest N firms in the industry.
tangency equilibrium
In monopolistic competition, in the long-run tangency equilibrium each firm’s demand curve just touches its AC curve at the output level at which MC equals MR. Each firm maximizes profits but just breaks even. There is no more entry or exit.
Collusion
is an explicit or implicit agreement to avoid competition.
A game
A game is a situation in which intelligent decisions are necessarily interdependent.
A strategy
A strategy is a game plan describing how a player acts, or moves, in each possible situation.
In Nash equilibrium
In Nash equilibrium, each player chooses the best strategy, given the strategies being followed by other players.
A dominant strategy
A dominant strategy is a player’s best strategy whatever the strategies adopted by rivals.
A commitment
A commitment is an arrangement, entered into voluntarily, that restricts future actions.
A credible threat
A credible threat is one that, after the fact, is still optimal to carry out.
in the Cournot model
each firm treats the output of the other firm as given.
