Oligopoly and Monopolistic Competition

Market Structure

Organization of industries by number of firms.

Industrial Organization

Economics field studying market structures.

Monopoly

Market with only one firm.

Interdependence of Profits

Firms' profits depend on competitors' actions.

Increasing Returns to Scale

Lower average costs with increased output.

Long-run ATC

Average total cost in the long run.

Duopoly

Market supplied by two firms.

Strategic Interaction

Firms consider rivals' reactions to decisions.

Collusive Outcomes

Firms cooperate to set prices or output.

Competitive Outcomes

Firms compete leading to lower prices.

Revenue Example

Selling more units can lower market price.

Cost-Effective Firms

Larger firms often have lower costs.

Price Elasticity

Sensitivity of quantity demanded to price changes.

Price Rigidity

Prices remain stable despite changes in demand.

Game Theory

Study of strategic decision making among firms.

Barriers to Entry

Obstacles preventing new firms from entering market.

Consumer Choice

Decisions made by consumers based on preferences.

Market Dynamics

Changes in market conditions over time.

Oligopoly

Market structure with few firms influencing prices.

Competition

Firms maximize profits without regard for rivals.

Cooperation

Firms work together to maximize joint profits.

Cutthroat Competition

Aggressive pricing strategies to undercut rivals.

Collusion

Illegal cooperation among firms to fix prices.

Cartel

Explicit agreement among firms to control prices.

Deadweight Loss

Loss of economic efficiency when equilibrium is not achieved.

Perfect Competition

Market structure with many firms and identical products.

Product Differentiation

Distinguishing products to gain market power.

Differentiation by Style

Variation in product design or type.

Differentiation by Location

Geographical advantages affecting consumer choices.

Differentiation by Quality

Variations in product quality affecting consumer preference.

Industry Concentration

Dominance of few firms in a market.

Merger

Combination of two or more firms into one.

Antitrust Law

Regulations to prevent monopolistic behavior.

Long-term Collusion

Sustained cooperation among firms over time.

Long-term Competition

Sustained rivalry among firms over time.

Increased Concentration

Fewer firms dominate a market, enhancing market power.

Economic Surplus

Total benefit to consumers and producers in a market.

Bargaining Power of Buyers

Ability of consumers to influence prices.

Output Restriction

Limiting production to raise prices.

Market Share

Percentage of total sales in a market held by a firm.

Rivalry

Competition between firms in the same market.

Consumer Preference

Tastes and choices influencing purchasing decisions.

Firm Strategy

Plan of action to achieve business objectives.

Profit Maximization

Achieving the highest possible profit.

Economic Analysts

Experts evaluating market dynamics and mergers.

Emerging Start-ups

New businesses disrupting existing market structures.

Fixed Costs

Costs that do not change with production volume.

Returns to Scale

Change in output resulting from a proportional change in inputs.

Social Harm

Negative impact on society from business practices.

Consumer Welfare

Well-being of consumers in the market.

Monopolistic Competition

Market structure with many small firms selling differentiated products.

Differentiated Products

Substitutes that are not identical, catering to diverse preferences.

Market Power

Ability of a firm to influence product price.

Downward-Sloping Demand Curve

Indicates price decreases as quantity demanded increases.

Zero-Profit Equilibrium

Long-run condition where firms earn zero economic profit.

Excess Capacity

Production level below minimum average total cost.

Advertising Role

Convincing consumers to purchase more at existing prices.

Free Entry and Exit

No barriers for firms to enter or exit market.

Short-Run Profit Maximization

Produce where marginal revenue equals marginal cost.

Long-Run Adjustments

Market changes due to profits or losses affecting firms.

Consumer Preferences

Diverse styles lead to varied consumer choices.

Price Above Marginal Cost

Monopolistic firms charge more than the cost to produce.

Product Diversity

Variety of products benefits consumers in monopolistic competition.

Long-Run Demand Shift Left

New entrants reduce demand for existing firms.

Long-Run Demand Shift Right

Exits increase demand for remaining firms.

P=MC Rule

Perfect competition condition where price equals marginal cost.

Shutdown Price

Price at which a firm will cease production.

Break-Even Price

Price where total revenue equals total cost.

Production Function

Relationship between inputs used and output produced.

Marginal Product

Additional output from one more unit of input.

Diminishing Returns

Decreasing additional output from increasing variable input.

Average Total Cost (ATC)

Total cost divided by quantity produced.

Monopolist's Production Decision

Determining output level to maximize profit.

Price Discrimination

Charging different prices to different consumers for same product.

Tacit Collusion

Unwritten agreement among firms to limit competition.

Interdependence in Oligopoly

Firms' decisions depend on competitors' actions.

Market Concentration

Increase in market share held by few firms.

Consumer Surplus

Difference between what consumers are willing to pay and actual price.

Producer Surplus

Difference between actual revenue and minimum revenue producers would accept.

Class Exam Details

30 multiple choice questions, bring #2 pencil.