Economics II

  1. Barriers to Entry
    Anything that artificially prevents the entry of firms into an industry.
  2. Pure Monopoly & Characteristics
    One firm; unique product; blocked entry; single firm has considerable control over price; nonprice competition may or may not be found.
  3. MR=MC rule
    The principle that a firm will maximize its profit by producing the output at which MR and MC are equal.
  4. MR=MC rule
    The principle that a firm will minimize its losses by producing the output at which MR and MC are equal.
  5. Monopolistic Competition & Characteristics
    Many firms; differentiated products; relatively easy entry; firms have some control over prices; considerable nonprice competition.
  6. Excess Capacity
    Plant resources that are underused when imperfectly competitive firms produce less output than that associated with achieving minimum AVC.
  7. Non-Price Competition
    Distinguishing products by product differentiation and then advertising the distinguished product to consumers.
  8. Oligopoly & Characteristics
    Few firms; sells either standardized or differentiated products; entry is difficult; the firm has limited control over price b/c of mutual interdependence; there is typically nonprice competition.
  9. Concentration Ratios
    The percentage of the total sales of an industry made by the four largest sellers in the industry.
  10. Price Leadership
    An informal method that firms in an oligopoly may employ to set the price of their product.
  11. Price Leadership method
    One firm (the leader) announce a change in price and the other firms (the followers) soon announce identical or similar changes.
  12. Collusion
    Firms act together and in agreement (collude) to fix prices, divide a market, or otherwise restrict competition.
  13. Kinked Demand Curve
    The demand curve for a noncollusive oligopolist; based on the assumption that rivals will match a price decrease & ignore a price increase.
  14. Game Theory
    Analyzing the behavior of oligopolists that uses the theory of strategy associated with games such as chess and bridge.
  15. Cartel
    A formal agreement among firms in an industry to set the price of a product and establish the outputs of the individual firms or to divide the market for the product geographically.
  16. Tactic Understanding
    • An unspoken, unwritten agreement by an oligopolist to set prices and outputs that does not involve outright collusion.
    • Ex. price leadership
  17. Merger
    Combining two firms into a single firm.
  18. Derived Demand
    The demand for a resource that depends on the demand for the products it helps to produce.
  19. Wage Rate
    The price paid for the use of services of labor per unit of time (per hr, day, and so on).
  20. Monoposonist
    A market structure in which there is only a single buyer of a good, service, or resource.
  21. Craft Union
    Limits its membership to workers with a particular skill (craft).
  22. MRC
    Marginal Resource Cost
  23. Marginal Resource Cost
    The amount the total cost of employing a resource increases when a firm employs 1 additional unit of the resource; change in TC/change in quantity
  24. MRP
    Marginal Revenue Product
  25. Marginal Revenue Product
    The change in a firms TR when it employs 1 additional unit of a resource; change in TR/ change in quantity
  26. Exclusive Unionism
    Restricting the supply of skilled union labor to increase the wages received by union members; typically employed by a craft union.
  27. Inclusive Unionism
    The practice of a labor union of including as members all workers employed in the industry.
  28. Bilateral Monopoly
    A single seller (monopoly) and a single buyer (monopsony).
  29. Occupational Licensing
    Laws that require that a worker satisfy certain specified requirements and obtain a license from a licensing board before engaging in a particular occupation.
  30. Wage Differentials
    The difference between the wage received by one worker and that received by another worker.
  31. Compensating Differences
    Differences in the wages received by workers in different jobs to compensate for nonmonetary differences in the jobs.
  32. Noncompeting Groups
    Workers who do not compete with one another for employment because the skills and training are substantially different from those other workers.
  33. Human Capital
    The knowledge and skills that make a person productive.
Card Set
Economics II
Test III