Economics II

Anything that artificially prevents the entry of firms into an industry.

One firm; unique product; blocked entry; single firm has considerable control over price; nonprice competition may or may not be found.

The principle that a firm will maximize its profit by producing the output at which MR and MC are equal.

The principle that a firm will minimize its losses by producing the output at which MR and MC are equal.

Many firms; differentiated products; relatively easy entry; firms have some control over prices; considerable nonprice competition.

Plant resources that are underused when imperfectly competitive firms produce less output than that associated with achieving minimum AVC.

Distinguishing products by product differentiation and then advertising the distinguished product to consumers.

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.

The percentage of the total sales of an industry made by the four largest sellers in the industry.

An informal method that firms in an oligopoly may employ to set the price of their product.

One firm (the leader) announce a change in price and the other firms (the followers) soon announce identical or similar changes.

Firms act together and in agreement (collude) to fix prices, divide a market, or otherwise restrict competition.

The demand curve for a noncollusive oligopolist; based on the assumption that rivals will match a price decrease & ignore a price increase.

Analyzing the behavior of oligopolists that uses the theory of strategy associated with games such as chess and bridge.

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.

• An unspoken, unwritten agreement by an oligopolist to set prices and outputs that does not involve outright collusion.
• Ex. price leadership

Combining two firms into a single firm.

The demand for a resource that depends on the demand for the products it helps to produce.

The price paid for the use of services of labor per unit of time (per hr, day, and so on).

A market structure in which there is only a single buyer of a good, service, or resource.

Limits its membership to workers with a particular skill (craft).

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

Marginal Revenue Product

The change in a firms TR when it employs 1 additional unit of a resource; change in TR/ change in quantity

Restricting the supply of skilled union labor to increase the wages received by union members; typically employed by a craft union.

The practice of a labor union of including as members all workers employed in the industry.

A single seller (monopoly) and a single buyer (monopsony).

Laws that require that a worker satisfy certain specified requirements and obtain a license from a licensing board before engaging in a particular occupation.

The difference between the wage received by one worker and that received by another worker.

Differences in the wages received by workers in different jobs to compensate for nonmonetary differences in the jobs.

Workers who do not compete with one another for employment because the skills and training are substantially different from those other workers.

The knowledge and skills that make a person productive.