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Econ2106test3
Vocab Ch. 15 & 8
| Question | Answer |
|---|---|
| Where relatively few firms control all or most of production and sale of a product | Oligopoly |
| When firm shapes its policy with an eye to the policies of competing firms | Mutual interdependence |
| Economies of large-scale production make operation on small scale extremely unprofitable, discourages new firms from entering market | |
| when firms act together to restrict competition | collude |
| collection of firms that agree on sales, pricing, and other decisions | cartel |
| determination of price based on marginal revenue derived from market demand schedule and marginal cost schedule of firms in industry | joint profit maximization |
| indicates price rigidity in oligopoly when competitors show a greater tendency to follow price reductions than price increases | kinked demand curve |
| when a dominant firm that produces a large portion of industry's output sets a price that maximizes its profits, and other firms follow | price leadership |
| Mutual interdependence of oligopolists tempts them to collude in order to reduce uncertainty and increase potential for economic profits | |
| Most strong collusive oligopolies are rather short lived because of strick antitrust laws, and cheating within collusive firms | |
| indicates price rigidity in oligopoly when competitors show a greater tendency to follow price reductions than price increases | kinked demand curve |
| large firm in an oligopoly that unilaterally makes changes in its product prices that competitors tend to follow | price leader |
| a competitor in an oligopoly that goes along with the pricing decision of the price leader | price follower |
| setting a price deliberately low in order to drive out competitors | predatory pricing |
| firms attempt to maximize profits by acting in ways that minimize damage from competitors | game theory |
| collusion by two firms in order to improve their profit maximizations | cooperative game |
| each firm sets its own price without consulting other firms | non cooperative game |
| strategy that will be optimal regardless of opponents' actions | dominant strategy |
| basic problem facing non colluding oligopolists in maximizing their own profit | prisoners' dilemma |
| summary of possible outcomes of various strategies | payoff matrix |
| strategy used in repeated games where one player follows the other player's move in the previous round; leads to greater cooperation | tit-for-tat strategy |
| when number of other people purchasing the good influences quantity demanded | network externality |
| increase in a consumer's quantity demanded for a good because a greater number of other consumers are purchasing the good | positive network externality |
| increase in a consumer's demand for a good because fewer consumers are purchasing the same good | negative network externality |
| a positive network externality in which a consumer's demand for a product increases because other consumers own it | bandwagon effect |
| costs involved in changing from one product to another brand or in changing suppliers | switching costs |
| a benefit or cost from consumption or production that spills over onto those who are not consuming or producing the good | externality |
| occurs when benefits spill over to an outside party who is not involved in producing or consuming the good | positive externality |
| occurs when costs spill over to an outside party who is not involved in producing or consuming the good | negative externality |
| a good that is nonrivalrous in consumption and nonexcludable | public good |
| good with rivalrous consumption and excludability | private good |
| deriving benefits from something not paid for | free rider |
| a rival good that is nonexcludable | common resource |
| occurs when the available information is initially distributed in favor of one party relative to another in an exchange | asymmetric information |
| situation where an informed party benefits in an exchange by taking advantage of knowing more than the other party | adverse selection |
| taking additional risks because you are insured | moral hazard |
| situation that arises in certain auctions where the winner is worse off than the loser because of an overly optimistic value placed on the good | winner's curse |
Created by:
crleveille