Monopolistic Competition and Oligopoly - chapter 15

Collusion

the act of working together to make decisions about price and quantity.

Producers

________ have an incentive to differentiate their products, either by making them truly different or by convincing consumers that they are different.

Oliogopolists

________ make strategic decisions about price and quantity that take into account the expected choices of their competitors.

Oligopoly

a market with only a few firms that sell a similar good or service.

marginal cost

Because firms maximize profits at a price that is higher than ________, some mutually beneficial trades never occur.

Product differentiation

when goods are close but imperfect substitutes.

monopoly

Just like a(n) ________, a monopolistically competitive firm faces a downward- sloping demand curve, which means that marginal revenue is less than price.

Firms

________ can maximize industry profits by producing the equivalent monopoly quantity and splitting revenues.

profit-maximizing price

The ________ is determined by the point on the demand curve that corresponds to this quantity.

deadweight loss

Because the equilibrium is not the same as in a competitive market, oligopoly results in some ________ and increases producer surplus at the expense of consumer surplus.

additional unit of output

The increase in profit retained from a(n) ________ is called the price effect.

Nash equilibrium

an equilibrium is reached when all players choose the best strategy they can, given the choices of all other players.

Monopolistic competition

a market with firms that sell goods and services that are similar, but slightly different.

Producers

________ invest in advertising to convince consumers that their products are different from other similar products.

Marginal cost

________ is also less than price.

product differentiation

when goods are close but imperfect substitutes

dominant strategy

the best strategy for a player to follow, no matter what strategy other players choose

Nash equilibrium

an equilibrium reached when all players choose the best strategy they can, given the choices of all other players

Cartel

a number of firms or groups that collude to make production decisions about quantities or prices