Key Terms
Terms
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- Free Entry
- when anyone can decide to enter a market
- Oligopoly
- a market structure in which only a few sellers offer similar or identical products
- Imperfect Competition
- when firms have competitors but, at the same time, do not face so much competition that they are price takers
- Cartel
- a group of firms acting in unison
- Price Taker
- a buyer or seller that must accept the price the market determines
- Duopoly
- an oligopoly with only two members
- Dominant Strategy
- a strategy that is best for a player in a game regardless of the strategies chosen by the other players
- Average Revenue
- total revenue divided by the quantity sold
- Marginal Revenue
- the change in total revenue from an additional unit sold
- Sunk Cost
- a cost that has already been committed and cannot be recovered
- Collusion
- an agreement among firms in a market about quantities to produce or prices to charge
- Competitive Market
- a market with many buyers and sellers trading identical products so that each buyer and seller is a price taker
- Monopoly
- a firm that is the sole seller of a product without close substitutes
- Nash Equilibrium
- a situation in which economic participants interacting with one another each choose their best strategy given the strategies that all the others have chosen
- Natural Monopoly
- a monopoly that arises because a single firm can supply a good or service to an entire market at a smaller cost than could two or more firms
- Game Theory
- the study of how people behave in strategic situations
- Prisoner's Dilemma
- a particular "game" between two captured prisoners that illustrates why cooperation is difficult to maintain even when it is mutually beneficial
- Efficient Scale
- the quantity of output that minimizes average total cost
- Monopolistic Competition
- a market structure in which many firms sell products that are similar but not identical
- Price Maker
- a monopoly where the seller sets the price
- Shut Down
- when a firm decides to not produce anything at all