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Economics Midterm
Ch. 13
15
Economics
Undergraduate 3
10/24/2008

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Cards

Term
Oligopoly
Definition
A market structure in which a small number of interdependent firms compete.
Term
Barrier to entry
Definition
Anything that keeps news firms from entering an industry in which firms are earning economic profits.
Term
Economies of scale
Definition
The situation when a firm's long-run average costs fall as it increase output.
Term
Patent
Definition
The exclusive right to a product for a period of 20 years from the date the product is invented.
Term
Game theory
Definition
The study of how people make decisions in situations in which attaining their goals depends on their interactions with others; in economics, the study of decisions of firms where the profits of each firm depend on its interaction with other firms.
Term
Business strategy
Definition
Actions taken by a firm to achieve a goal, such as maximizing profits.
Term
Payoff matrix
Definition
A table that shows the payoffs that each firm earns from every combination of strategies by the firms.
Term
Collusion
Definition
An agreement among firms to charge the same price or otherwise not to compete.
Term
Dominant strategy
Definition
A strategy that is best for a firm, no matter what strategies the other firm uses.
Term
Nash equilibrium
Definition
A situation in which each firm chooses the best strategy, given the strategies chosen other firms.
Term
Cooperative equilibrium
Definition
An equilibrium in a game in which players cooperate to increase their mutual payoff.
Term
Noncooperative equilibrium
Definition
An equilibrium in a game in which players do not cooperate but pursue their own self-interest.
Term
Prisoner's dilemma
Definition
A game in which pursuing dominant strategies results in noncooperation that leaves everyone worse off.
Term
Price leadership
Definition
A form of implicit collusion where one firm in an oligopoly announces a price change, which is matched by the other firms in the industry.
Term
Cartel
Definition
A group of firms that collude by agreeing to restrict output to increase prices and profits.
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