Final Exam Flashcards
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.
Perfect Competition
When there is only one seller in the market.
Monopoly
The extent to which a seller can charge a higher price without losing many sales to competing businesses.
Market Power
A market with only a handful of large sellers
Oligopoly
A market with many small businesses competing, each selling differentiated products.
Monopolistic competition
Efforts by sellers to make their products differ from those of their competitors
Product Differentiation
When you face at least some competitors and/or you sell products that differ at least a little from your competitors.
Imperfect competition
The addition to total revenue you get from selling one more unit
Marginal Revenue
An individual firm’s demand curve, summarizes the quantity that buyers demand from an individual firm as it changes its price.
Firm Demand Curve
Sell one more item if the marginal revenue is greater than (or equal to) marginal cost
Rational Rule for Sellers
A measure of industry concentration formed by adding the market shares of the largest firms
Concentration Ratio
A measure of industry concentration formed by adding the squares of market shares of all firms.
Herfindahl-Hirschman Index
An agreement to limit competition
Collusion
A market in which it is the cheapest for a single business to service the market
Natural Monopoly
The total revenue a firm receives, less its explicit financial costs and the entrepreneur’s implicit opportunity costs
Economic Profit
The total revenue a business receives, less its explicit financial costs.
Accounting profit
Revenue per unit, calculated as total revenue divided by the quantity supplied
Average Revenue
Costs like land and equipment that do not change as output changes
Fixed Costs