Chapter 9, 10, 11 & 18 Flashcards Preview

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Flashcards in Chapter 9, 10, 11 & 18 Deck (44):
1

Cartel

a group of firms that collude to produce the monopoly output and sell at the monopoly price

2

collusion

when firms act together to reduce output and keep prices high

3

differentiated product

a product that is perceived by consumers as distinctive in some way

4

duopoly

an oligopoly with only two firms

5

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

6

imperfectly competitive

firms and organizations that fall between the extremes of monopoly and perfect competition

7

kinked demand curve

a perceived demand curve that arises when competing oligopoly firms commit to match price cuts, but not price increases

8

monopolistic competition

many firms competing to sell similar but differentiated products

9

oligopoly

when a few large firms have all or most of the sales in an industry

10

prisoner's dilemma

a game in which the gains from cooperation are larger than the rewards from pursuing self-interest

11

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

12

barriers to entry

the legal, technological, or market forces that may discourage or prevent potential competitors from entering a market

13

copyright

a form of legal protection to prevent copying, for commercial purposes, original works of authorship, including books and music

14

deregulation

removing government controls over setting prices and quantities in certain industries

15

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

16

legal monopoly

legal prohibitions against competition, such as regulated monopolies and intellectual property protection

17

marginal profit

profit of one more unit of output, computed as marginal revenue minus marginal cost

18

monopoly

a situation in which one firm produces all of the output in market

19

natural monopoly

economic conditions in the industry, for example, economies of scale or control of a critical resource, that limit effective competition

20

patent

a government rule that gives the inventor the exclusive legal right to make, use, or sell the invention for a limited time

21

predatory pricing

when an existing firm uses sharp but temporary price cuts to discourage new competition

22

trade secrets

methods of production kept secret by the producing firm

23

trademark

an identifying symbol or name for a particular good and can only be used by the firm that registered that trademark

24

acquisition

when one firm purchases another

25

antitrust laws

laws that give government the power to block certain mergers, and even in some cases to break up large firms into smaller ones

26

bundling

a situation in which multiple products are sold as one

27

concentration ratio

an early tool to measure the degree of monopoly power in an industry; measures what share of the tool sales in the industry are accounted for by the largest firms, typically the top four to eight firms

28

cost-plus regulation

when regulators permit a regulated firm to cover its costs and to make a normal level of profit

29

exclusive dealing

an agreement that a dealer will sell only products from one manufacturer

30

four-firm concentration ratio

the percentage of the total sales in the industry that are accounted for by the largest four firms

31

herfindahl-hirschman index (HHI)

approach to measuring market concentration by adding the square of the market share of each firm in the industry

32

market share

the percentage of total sales in the market

33

merger

when two formerly separate firms combine to become a single firm

34

minimum resale price maintenance agreement

an agreement that requires a dealer who buys from a manufacturer to sell for at least a certain minimum price

35

price cap regulation

when the regulator sets a price that a firm cannot exceed over the next few years

36

regulatory capture

when the firms supposedly being regulated end up playing a large role in setting the regulations that they will follow and as a result, they "capture" the people doing the regulation, usually through the promise of a job in that "regulated" industry once their term in government has ended

37

restrictive practices

practices that reduce competition but that do not involve outright agreements between firms to raise prices or to reduce the quantity produced

38

tying sales

a situation where a consumer is allowed to buy one product only if the customer also buys another product

39

logrolling

the situation in which groups of legislators all agree to vote for a package of otherwise unrelated laws that they individually favor

40

median voter theory

theory that politicians will try to match policies to what pleases the median voter preferences

41

pork-barrel spending

spending the benefits mainly a single political district

42

rational ignorance

the theory that rational people will not vote if the costs of becoming informed and voting are too high or because they know their vote will not be decisive in the election

43

special interest groups

groups that are small in number relative to the nation, buy well organized and thus exert a disproportionate effect on political outcomes

44

voting cycle

the situation in which a majority prefers A over B, B over C, and C over A