Unit 5 Flashcards
Industry Structures
the makeup of an industry: its number of sellers and their size distribution, the nature of production, extent of barrier to entry
Pure Competition
price takers
many sellers, identical products, no substantial barriers to entry
Monopolistic Competition
many sellers, somewhat differentiated products, no substantial barriers to entry
Oligopoly
few relatively large sellers and substantial barriers to entry
identical of barely differentiated products
Monopoly
Single firm selling a product for which there are no close substitutes and big barriers to entry
Game Theory
the study of strategies employed by interdependent firms
Dominant Strategy
a strategy that should be pursued regardless of the strategy selected by the firms rival
(make more money)
Collusion
agreement between sellers to fix prices, divide up the market, or in some way to limit competition
Market Failure
situations in which a market economy produces too much or too little of certain products and thus does not make the most efficient use of societies limited resources
Imperfect Competition
Imperfect resource allocations - no incentive to carefully use scarce \ resources
monopolies do it a lot they restrict production which prevents competition and cause a artificial shortages
Inadequate Information
for resources to be allocated efficiently people (consumers, sellers, producers ect.) have to have enough information about market conditions
Externalities
Unintended side effect that whether benefits or harms a third party not involved in the activity that caused it
Social Cost
Full cost to society of producing a product
sum of private costs + external costs
Public Goods
products that are collectively consumed by everyone, true demand is not always shown because people don’t pay for them
Free Rider Problems
When a consumer can benefit from goods that they don’t pay for
