Unit 4 - Imperfect Competition Guide (copy)

Collusion

working together to maximize profit.

price discrimination

In ________, there is no deadweight loss and no consumer surplus as well, only producer surplus.

Nash equilibrium

point where both players can do no better than the other given the choice of their opponent.

Monopoly

market structure where there is only one firm producing a product.

Natural monopoly

has large fixed costs, and long economies of scale, has downward sloping ATC curve.

Cartels

a group that agrees to control the price and output of a product (often form in oligopoly)

Firms

________ are able to make an increased profit in the long run if there is less competition since ________ are considered to be price makers.

Monopolistic competition

is another term for imperfect competition, and occurs when many companies offer competing products which are similar but not perfect substitutes.

Payoff matrix

represents the payoff to each player to show combinations of given strategies.

Interdependent

all the actions that a firm takes will affect the other firms in the oligopoly (if They ask why the market is an oligopoly, say it’s because they’re interdependent)

Common barriers to entry

control of scarce resources, legal barriers, high startup costs.

Common barriers to entry

control of scarce resources, legal barriers, high startup costs

Monopoly

market structure where there is only one firm producing a product

Natural monopoly

has large fixed costs, and long economies of scale, has downward sloping ATC curve

Imperfect price discrimination

charging consumers different prices based on the buyers willingness to pay

Perfect price discrimination

charges all consumers the maximum they are willing to pay, no deadweight loss, produce at P=MC

Monopolistic competition

is another term for imperfect competition, and occurs when many companies offer competing products which are similar but not perfect substitutes

Interdependent

all the actions that a firm takes will affect the other firms in the oligopoly (if They ask why the market is an oligopoly, say its because theyre interdependent)

Cartels

a group that agrees to control the price and output of a product (often form in oligopoly)

Collusion

working together to maximize profit

Payoff matrix

represents the payoff to each player to show combinations of given strategies

Dominant strategy

the strategy that has a better payoff regardless of what strategy the opponent chooses

Nash equilibrium

point where both players can do no better than the other given the choice of their opponent