Oligopoly and Monopolistic Competition

A collection of vocabulary flashcards covering essential terms related to oligopoly and monopolistic competition in microeconomics.

Oligopoly

A market structure in which a few firms dominate the market and compete against each other.

Monopolistic Competition

A market structure where many firms compete and sell slightly differentiated products.

Homogeneous Products

Goods that are identical and perfect substitutes for one another.

Differentiated Products

Goods that are similar but not identical, allowing for some degree of pricing power.

Entry Barriers

Obstacles that prevent new competitors from easily entering a market.

Residual Demand Curve

The demand for a firm's product after accounting for the competition's supply.

Cartel

A formal agreement among firms to collude and control production or prices.

Prisoner's Dilemma

A situation in which individuals acting in their own self-interest do not produce the optimal outcome.

Economic Profits

Profits that remain after all costs, including opportunity costs, have been subtracted.

Herfindahl-Hirschman Index (HHI)

A measure of market concentration calculated by summing the squares of the market shares of each firm.

Nash Equilibrium

A situation in which players in a strategic interaction choose their optimal strategy given the strategies chosen by others.

Long-Run Equilibrium

A situation in which firms in a market have adjusted their production to the point where economic profits are zero.

Game Theory

A framework for understanding strategic interactions among rational decision-makers.

Price Maker

A firm that has some control over the price it charges due to product differentiation.

Economic Losses

When total costs exceed total revenues, leading firms to exit the market.

Invisible Hand

A term used to describe the self-regulating nature of the market.