Lecture 7: Monopolistic Competition and Oligopoly

Vocabulary flashcards covering key concepts from the lecture.

Monopolistic Competition

A market structure with many firms selling differentiated products.

Oligopoly

A market structure with a small number of firms.

Product Differentiation

Making a product different from other similar products.

Short Run Equilibrium (Monopolistic Competition)

The point where marginal revenue equals marginal cost, determining output and price in the short term for a monopolistically competitive firm; can result in profit or loss.

Long Run Equilibrium (Monopolistic Competition)

The point where firms earn zero economic profit due to entry and exit of firms in the industry.

Game Theory

A tool used to analyse strategic behaviour that recognises mutual interdependence and takes account of the expected behaviour of others.

Nash Equilibrium

An equilibrium in which each player takes the best possible action given the action of the other player.

Cartel

A group of firms acting together to limit output, raise price, and increase economic profit.

Market Concentration

The extent to which a small number of firms account for a large percentage of the market.

Interdependence (Oligopoly)

The profit earned by each firm depends on the firm’s own actions and on the actions of the other firms.