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ECON 101
TEST 3
| Term | Definition |
|---|---|
| market structure | the conditions in an industry, such as number of sellers, how easy or difficult it is for a new firm to enter, and the type of products that are sold |
| perfect competition | each firm faces many competitors that sell identical products |
| price taker | a firm in a perfectly competitive market that must take the prevailing market price as given |
| marginal revenue | the additional revenue gained from selling one more unit |
| shutdown point | level of output where the marginal cost curve intersects the average variable cost curve at the minimum point of AVC; if the price is below this point, the firm should shut down immediately |
| entry | the long-run process of firms entering an industry in response to industry profits |
| exit | the long-run process of firms reducing production and shutting down in response to industry losses |
| long-run equilibrium | where all firms earn zero economic profits producing the output level where P = MR = MC and P = AC |
| barriers to entry | the legal, technological, or market forces that may discourage or prevent potential competitors from entering a market |
| copyright | a form of legal protection to prevent copying, for commercial purposes, original works of authorship, including books and music |
| deregulation | removing government controls over setting prices and quantities in certain industries |
| intellectual property | the body of law including patents, trademarks, copyrights, and trade secret law that protect the right of inventors to produce and sell their inventions |
| legal monopoly | legal prohibitions against competition, such as regulated monopolies and intellectual property protection |
| monopoly | a situation in which one firm produces all of the output in a market |
| natural monopoly | economic conditions in the industry, for example, economies of scale or control of a critical resource, that limit effective competition |
| patent | a government rule that gives the inventor the exclusive legal right to make, use, or sell the invention for a limited time |
| predatory pricing | when an existing firm uses sharp but temporary price cuts to discourage new competition |
| trade secrets | methods of production kept secret by the producing firm |
| trademark | an identifying symbol or name for a particular good and can only be used by the firm that registered that trademark |
| allocative efficiency | producing the optimal quantity of some output; the quantity where the marginal benefit to society of one more unit just equals the marginal cost |
| marginal profit | profit of one more unit of output, computed as marginal revenue minus marginal cost |
| differentiated product | a product that is perceived by consumers as distinctive in some way |
| imperfectly competitive | firms and organizations that fall between the extremes of monopoly and perfect competition |
| monopolistic competition | many firms competing to sell similar but differentiated products |
| oligopoly | when a few large firms have all or most of the sales in an industry |
| cartel | a group of firms that collude to produce the monopoly output and sell at the monopoly price |
| collusion | when firms act together to reduce output and keep prices high |
| duopoly | an oligopoly with only two firms |
| game theory | a branch of mathematics often used by economists that analyzes situations in which players must make decisions and then receive payoffs based on what decisions the other players make |
| kinked demand curve | a perceived demand curve that arises when competing oligopoly firms commit to match price cuts, but not price increases |
| prisoner’s dilemma | a game in which the gains from cooperation are larger than the rewards from pursuing self-interest |
Created by:
EdL
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