Final Exam Flashcards

1
Q

Markets in which 1) all businesses in an industry sell and identical good; and 2) there are many sellers and many buyers, each of whom is small relative to the size of the market.

A

Perfect Competition

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2
Q

When there is only one seller in the market.

A

Monopoly

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3
Q

The extent to which a seller can charge a higher price without losing many sales to competing businesses.

A

Market Power

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4
Q

A market with only a handful of large sellers

A

Oligopoly

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5
Q

A market with many small businesses competing, each selling differentiated products.

A

Monopolistic competition

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6
Q

Efforts by sellers to make their products differ from those of their competitors

A

Product Differentiation

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7
Q

When you face at least some competitors and/or you sell products that differ at least a little from your competitors.

A

Imperfect competition

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8
Q

The addition to total revenue you get from selling one more unit

A

Marginal Revenue

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9
Q

An individual firm’s demand curve, summarizes the quantity that buyers demand from an individual firm as it changes its price.

A

Firm Demand Curve

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10
Q

Sell one more item if the marginal revenue is greater than (or equal to) marginal cost

A

Rational Rule for Sellers

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11
Q

A measure of industry concentration formed by adding the market shares of the largest firms

A

Concentration Ratio

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12
Q

A measure of industry concentration formed by adding the squares of market shares of all firms.

A

Herfindahl-Hirschman Index

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13
Q

An agreement to limit competition

A

Collusion

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14
Q

A market in which it is the cheapest for a single business to service the market

A

Natural Monopoly

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15
Q

The total revenue a firm receives, less its explicit financial costs and the entrepreneur’s implicit opportunity costs

A

Economic Profit

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15
Q

The total revenue a business receives, less its explicit financial costs.

A

Accounting profit

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16
Q

Revenue per unit, calculated as total revenue divided by the quantity supplied

A

Average Revenue

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17
Q

Costs like land and equipment that do not change as output changes

A

Fixed Costs

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18
Q

Costs like raw materials and worker time that change as output changes

A

Variable Costs

19
Q

Cost per unit, calculated as your firm’s total costs (including fixed and variable costs) divided by the quantity produced

A

Average Cost

20
Q

The cost to product an extra unit

A

Marginal Cost

21
Q

Profits sold per unit

A

Profit margin per unit

22
Q

The horizon over which the production capacity, and the number and type of competitors you face, cannot change

A

Short Run

23
Q

The horizon over which you, or your rivals, may expand or contract production capacity and new rivals may enter the market or existing firms may exit.

A

Long Run

24
Q

You should enter a market if you expect to earn a positive economic profit, which occurs when the price exceeds your average cost

A

Rational Rule for Entry

25
Q

Exit the market if you expect to earn a negative economic profit, which occurs if the price is less than your average cost.

A

Rational Rule for Exit

26
Q

When there are no factors making it particularly difficult or costly for a business to enter or exit an industry

A

Free Entry

27
Q

Obstacles that make it difficult for new firms to enter a market

A

Barriers to Entry

28
Q

Selling the same good at different prices

A

Price Discrimination

29
Q

An impediment that makes it costly for customers to switch to buying from another business

A

Switching Costs

30
Q

The maximum price a customer will pay for a product. It is equal to their marginal benefit

A

Reservation Price

31
Q

Charging each customer their reservation price

A

Perfect price discrimination

32
Q

When your best choice may depend on what others choose, and their best choice may depend on what you choose.

A

Strategic Interaction

33
Q

The choice that yields the highest payoff given the other player’s choice

A

Best Response

33
Q

A table that lists your choices in each row, the other player’s choices in each column, and so shows all possible outcomes, listing the payoffs in each cell

A

Payoff Table

34
Q

If you put a checkmark next to each player’s best response, then an outcome with a check mark from each player is a Nash Equilibrium

A

Check Mark Method

35
Q

An equilibrium in which the choice that each player makes is a best response to the choices other players are making

A

Nash Equilibrium

36
Q

When your best response is to take a different (but complementary) action to the other player

A

Anti-Coordination Game

36
Q

When all players have a common interest in coordinating their choices

A

Coordination Game

37
Q

A cue from outside a game that helps you coordinate on a specific equilibrium

A

Focal Point

38
Q

When one party to a transaction knows something the other doesn’t

A

Private Information

39
Q

The tendency for the mix of goods to be skewed toward more high-cost buyers when sellers don’t know buyers type

A

Adverse Selection of Buyers

40
Q

The actions you take because they are not fully observable and you are partially insulated from their consequences

A

Moral Hazard

41
Q

The problems that arise when a principal hires an agent to do something on they’re behalf, the the principal cannot perfectly observe the agent’s actions

A

Principal-agent problem

42
Q

Linking the income your workers earn to measures of their performance

A

Pay-For-Performance