Vocabulary: Unit Five Flashcards

1
Q

Price taker

A

A firm that can sell as much as it wants at the market price without affecting the market price, but can’t sell anything at a price above the market price

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2
Q

Marginal revenue

A

The amount of revenue received for selling one more unit of product

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3
Q

Productive efficiency

A

When a firm produces at the lowest per unit cost possible

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4
Q

Lowest per unit cost

A

Output level where average total cost is at its minimum

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5
Q

Allocatively efficient

A

When firm’s allocate resources so the number and type of goods or services they produce are the same as what consumers value

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6
Q

Monopoly

A

An industry with only one firm producing a good or service with no close substitutes with barriers to entry that prevent new firm’s from entering the industry, and typically with positive economic profits

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7
Q

Barriers to entry

A

Things that prevent new firm’s from entering an industry

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8
Q

Market power

A

Price-setting ability

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9
Q

Profit maximizing level of output

A

Where marginal cost equals marginal revenue

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10
Q

Profit maximizing price

A

The price consumers are willing to pay for the profit-maximizing level of output

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11
Q

Monopolist’s profits

A

Total revenue minus total costs

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12
Q

Deadweight loss

A

The lost opportunity to produce output whose benefit to consumers is greater than the cost of production

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13
Q

Price discrimination

A

Selling the same product to different consumers at different prices based on demand difference

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14
Q

Arbitrage

A

Lower-price consumers reselling to higher price consumers

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15
Q

Natural monopoly

A

A firm that experiences decreasing average total cost over the whole range of production demanded in the market

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16
Q

Fair return

A

Average cost pricing; the monopoly is able to charge a price equal to average total cost

17
Q

Monopolistically competitive industry

A

Imperfect competition because firms have some control over price of output; many firms, differentiated products, price-searching, free entry and exit, non price competition

18
Q

Non-price competition

A

Advertising; competition unrelated to price

19
Q

Oligopoly

A

Few competitions, independent firm’s, barriers to entry

20
Q

Collusion

A

Firm’s jointly determine price or output to increase profits

21
Q

Cartel

A

Formal collusion agreement

22
Q

Tacit collusion

A

Unspoken or unwritten collusion agreements

23
Q

Game theory

A

Tracks strategic moves by a firm and countermoves by rival firms; decisions regarding pricing and output levels depend on rival’s choices

24
Q

Price leadership

A

A dominant firm sets a price and other firms in the industry take that price and sell whatever quantity they can

25
Q

Cost-plus pricing

A

Output price is determined by adding a specific percentage markup to average variable cost

26
Q

Kinked demand curve

A

Firm’s think rivals will follow price cuts but not price raises

27
Q

Horizontal merger

A

Combines two firms that produce similar products

28
Q

Vertical merger

A

Combines two firms that produce products used in different stages of the production process of a good

29
Q

Conglomerate merger

A

Combines two firms that produce products in two different industries

30
Q

Market concentration

A

A measure of how dominant the four largest firms are in an industry

31
Q

Antitrust legislation

A

Aimed at businesses trying to restrain trade or significantly reduce competition

32
Q

Sherman Act of 1890

A

Made it illegal to monopolize or attempt to monopolize an industry

33
Q

Clayton Act of 1914

A

Gave the government more enforcement power against anticompetitive business procedures

34
Q

Federal Trade Commission Act of 1914

A

Has the power to investigate and hold hearings regarding unfair business practice

35
Q

Cellar-Kefauver Act of 1950

A

Banned vertical and conglomerate mergers that would unreasonable restrain trade

36
Q

Hart-Scott-Rodino Act of 1980

A

Allowed for businesses organized either as proprietorships or partnerships to be reviewed for monopolistic business practices