barrier to entry
factors that prevents new firms from entering and competing in imperfectly competitive industries.
An industry in which individual firms have some control over the price of their output
an imperfectly competitive firm's ability to raise price without losing all of the quantity demanded for its product.
An industry with a single firm that PRODUCES A PRODUCT THAT HAS NO CLOE SUBSTITUTES and in which significant barriers to entry prevent other firms from entering the industry to compete for profits.
An industry that realizes such large economies of scale in producing its product that SINGLE-FIRM PRODUCTION of that good or service IS MOST EFFICIENT
A barrier to entry that grants exclusive use of the patented product or process to the inventor
The VALUE of a product to a consumer INCREASES with the NUMBER of that product BEING SOLD or used in the market.
Actions taken by households or firms to preserve positive profits
occurs when the government becomes the tool of the rent seeker and the allocation of resources is made even less efficient by the intervention of government
public choice theory
An economic theory that the public officials who set economic policies and regulate the players act in their own self-interest, just as firms do.
charging different prices to different buyers
perfect price discrimination
Occurs when a firm charges the maximum amount that buyers are willing to pay for each unit.
rule of reason
The criterion introduced by the Supreme Court in 1911 to determine whether a particular action was illegal ("unreasonable") or legal ("reasonable") within the terms of the Sherman Act.
Passed by congress in 1914 to strengthen the Sherman Act and clarify the rule of reason, the act outlawed specific monopolistic behaviors such as tying contracts, price discrimination, and unlimited mergers.
Federal Trade Commission
A federal regulatory group created by Congress in 1914 to investigate the structure and behavior of firms engaging in interstate commerce, to determine what constitutes unlawful "unfair" behavior, and to issue cease-and-desist orders to those found in violation of antitrust law
few sellers dominate the market.
Five Forces model
understand the five competitive forces that determine the level of competition and profitability in an industry.
The share of industry output in sales or employment accounted for by the top firms.
Markets in which entry and exit are easy.
A group of firms that agree not to compete with each other on the basis of price, production, or other competitive dimensions. Cartel members operate as a monopolist to maximize their joint profits
occurs when price- and quantity-fixing agreements among producers are implicits.
A form of oligopoly in which one DOMINANT FIRM SETS PRICES and all the smaller firms in the industry follow its pricing policy.
an oligopoly consisting of only two firms
a strategy that is best for a player in a game regardless of the strategies chosen by the other players
A game in which the players are prevented from cooperating and in which each has a dominant strategy that leaves them both worse off than if they could cooperate.
a situation in which each firm chooses the best strategy, given the strategies chosen by other firms
a strategy chosen to maximize the minimum gain that can be earned.
A repeated game strategy in which a player responds in kind to an opponent's play.
Extended the government's authority to control mergers.
an index of market concentration found by summing the square of percentage shares of firms in the market
characterized by a large number of firms, no barriers to entry, and product differentiation
A positioning strategy that some firms use to distinguish their products from those of competitors to achieve market power
Products differ in ways that make them better for some people and worse for others.
A branch of economics that uses the insights of psychology and economics to investigate decision making.
Actions that individuals take in one period to try to control their behavior in a future period.
A product difference that, from everyone's perspective, makes a product better than rival products.
law that made it illegal to create monopolies or trusts that restrained free trade