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Definition
| The ability to influence the market, and in particular the market price by influencing the total quantity offered for sale. |
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Definition
A firm that produces a good or service for which no close substitute exists and that is protected by a barrier that prevents other firms from selling that good or service.
Two key features:
-No close substitutes
-Barriers to entry |
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Definition
| Legal or natural constraints that protect a firm from potential competitors. |
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Definition
| A market in which competition and entry are restricted by the granting of a public franchise, government license, patent or copyright. |
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Definition
| An industry in which economies of scale enable one firm to supply the entire market at the lowest possible cost. |
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Definition
| A firm that must sell each unit of its output for the same price to all its customers. |
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Definition
| The practice of selling different units of a good or service for different prices. |
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Term
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Definition
| Consumer surplus, producer surplus, or economic profit in terms of monopoly. |
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Term
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Definition
The pursuit of wealth by capturing economic rent.
The people that do this pursue their goal in two main ways:
-Buy a monopoly
-Create a monopoly |
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Term
| Perfect price discrimination |
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Definition
| This occurs if a firm is able to sell each unit of output for the highest price anyone is willing to pay for it. |
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Term
| Marginal cost pricing rule |
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Definition
| A rule that sets the price of a good or service equal to the marginal cost of producing it. |
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Term
| Average cost pricing rule |
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Definition
| A rule that sets price to cover cost including normal profit, which means setting the price equal to average total cost. |
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Term
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Definition
A market structure in which:
-a large number of firms compete
-each firm produces a differentiated product
-firms compete on product quality, price and marketing
-firms are free to enter and exit |
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Term
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Definition
| What a firm practices if it makes a product that is slightly different from the products of competing firms. |
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Term
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Definition
A market structure in which:
-Natural or legal barriers prevent the entry of new firms
-A small number of firms compete |
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Definition
| An oligopoly market with two firms. |
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Definition
| A group of firms acting together-- colluding-- to limit output, raise price, and increase economic profit |
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Term
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Definition
| A tool for studying strategic behavior that takes into account the expected behavior of others and the recognition of mutual interdependence. |
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Term
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Definition
| All the possible actions of each player in a game. |
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Term
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Definition
| A table that shows the payoffs for every possible action by each player for ever possible action by each other player. |
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Term
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Definition
| The outcome of a game that occurs when player A takes the best possible action given the action of player B and player B takes the best possible action given the action of player A. |
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Term
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Definition
| An agreement between two or more producers to form a cartel to restrict output, raise the price, and increase profits. |
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Term
| Dominant strategy equilibrium |
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Definition
| An equilibrium in which the best strategy of each player is to cheat regardless of the strategy of the other player. |
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Term
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Definition
| An equilibrium in which the players make and share the monopoly profit. |
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Definition
| A market in which firms can enter and leave so easily that firms in the market face competition from potential entrants. |
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Definition
| A strategy that sets the price at the highest level that inflicts a loss on the entrant. |
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Term
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Definition
| A state in which the market does not allocate resources efficiently. |
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Term
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Definition
| A situations in which the choices of voters, firms, politicians, and bureaucrats are compatible and in which no group can improve its position by making a different choice. |
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Term
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Definition
| Rules administered by a government agency to influence economic activity by determining prices, product standards and types, and the conditions under which new firms may enter an industry. |
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Term
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Definition
| A law that regulates and prohibits certain kinds of market behavior, such as monopoly and monopolistic practices. |
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Term
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Definition
| A theory that politicians supply the regulation that achieves an efficient allocation of resources. |
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Term
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Definition
| A theory of regulation that states that regulation is in the self-interest of produces. |
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Term
| Marginal cost pricing rule |
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Definition
| A rule that sets price equal to marginal cost. |
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Term
| Average cost pricing rule |
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Definition
| A rule that sets price equal to average cost. |
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Term
| Rate of Return Regulation |
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Definition
| A regulation that requires the firm to justify its price by showing that the price enables it to earn a specified target percent return on its capital. |
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Term
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Definition
| A rule that specifies the highest price the firm is permitted to set. |
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Term
| Earnings sharing regulation |
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Definition
| A regulation that if a firm's profits rise above a target level , they must be shared with the firm's customers. |
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Term
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Definition
| Agreement between a manufacturer and a distributor on the price at which the product will be sold. |
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Term
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Definition
| Agreement between a manufacturer and a distributor on the price at which the product will be sold. |
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Term
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Definition
| An agreement to sell one product only. |
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Term
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Definition
| The action of setting a low price to drive competitors out of business with the intention of setting a monopoly price when the competition has gone. |
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Term
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Definition
| A cost or benefit that arises from production and falls on someone other than the producer, or a cost or benefit that arises from consumption and falls on someone other than the consumer. |
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Term
| Marginal private cost (MC) |
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Definition
| The cost of producing an additional unit of a good or service that is borne by the producer of that good or service. |
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Term
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Definition
| The cost of producing an additional unit of a good or service that falls on people other than the producer. |
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Term
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Definition
| The marginal cost incurred by the entire society and is the sum of marginal private cost and marginal external cost. |
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Term
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Definition
| Rights that are legally established titles to the ownership, use, and disposal of factors of production and goods and services that are enforceable in the courts. |
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Term
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Definition
| The proposition that if property rights exist, if only a small number of parties are involved, and if transactions costs are low, then private transactions are efficient. |
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Term
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Definition
| The opportunity costs of conducting a transaction. |
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Term
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Definition
| Taxes used as an incentive for producers to cut back on pollution. |
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Term
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Definition
| The benefit from an additional unit of a good or service that the consumer of that good or service receives. |
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Term
| Marginal external benefit |
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Definition
| The benefit from an additional unit of a good or service that people other than the consumer enjoy. |
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Term
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Definition
| The marginal benefit enjoyed by society. |
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Term
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Definition
| The production of a good or service by a public authority that receives its revenue from the government. |
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Term
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Definition
| A payment that the government makes to private producers. |
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Term
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Definition
| A token that the government provides to households, which they can use to buy specified goods or services. |
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Term
| Intellectual property rights |
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Definition
| Property rights for discoveries owned by the creators of knowledge. |
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Term
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Definition
| A government-sanctioned exclusive right granted to the inventor of a good, service, or productive process to produce, use, and sell the invention for a given number of years. |
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Term
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Definition
| A good or service or a resource is this if it is possible to prevent someone from enjoying the benefit of it. |
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Term
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Definition
| A good or service or a resource is this if it is impossible to prevent someone from benefiting from it. |
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Term
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Definition
| A good or service or a resource is this if its use by one person decreases the quantity available for someone else. |
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Term
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Definition
| A good or service or a resource is this if its use by one person does not decrease the quantity available for someone else. |
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Term
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Definition
| A good both rival and excludable. |
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Term
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Definition
| A good that is both nonrival and nonexcludable. |
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Term
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Definition
| A good that is rival and nonexcludable. |
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Term
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Definition
| The absence of an incentive for people to pay for what they consume. |
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Term
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Definition
| The absence of incentive to prevent the overuse and depletion of a resource. |
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Term
| Principle of minimum differentiation |
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Definition
| The tendency for competitors to make themselves similar to appeal to the maximum number of clients or voters. |
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Term
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Definition
| The decision not to acquire information because the cost of doing so exceeds the expected benefit. |
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Term
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Definition
| The theory that predicts that governments make choices that result in inefficiency. |
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Term
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Definition
| The theory in which governments make choices that result in inefficiency due to ignorant voters. |
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Term
| Individual transferable quota |
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Definition
| A production limit that is assigned to an individual who is free to transfer the quota to someone else. |
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Term
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Definition
| A demand for a factor of production. |
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Term
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Definition
| The change in total revenue that results from employing one more unit of labor. |
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Term
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Definition
| An organized group of workers that aims to increase wages and influence other job conditions. |
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Term
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Definition
| A market in which there is a single buyer. |
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Term
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Definition
| A situation in which a single seller faces a single buyer. |
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Term
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Definition
| A wage rate that a firm pays above the competitive equilibrium wage rate with the aim of attracting the most productive workers. |
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Term
| Renewable natural resources |
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Definition
| Resources that are repeatedly replenished by nature. |
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Term
| Nonrenewable natural resources |
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Definition
| Resources that nature does not replenish. |
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Term
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Definition
| The income received by the owner of a factor of production over and above the amount required to induce that owner to offer the factor for use. |
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Term
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Definition
| The present value of the future flow of marginal revenue product generated by the capital minus the price of the capital. |
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Term
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Definition
| Market income plus cash payments to households by the government. |
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Term
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Definition
| Wages, interest, rent, and profit earned in factor markets, before paying income taxes. |
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Term
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Definition
| A curve that graphs the cumulative percentage of income or wealth against the cumulative percentage of households. |
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Term
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Definition
| The value of the things that it owns at a point in time. |
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Term
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Definition
| The ratio of the area between the line of equality and the Lorenz curve to the entire area beneath the line of equality. |
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Term
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Definition
| A situation in which a household's income is too low to be able to buy the quantities of food, shelter, and clothing that are deemed necessary. |
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Term
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Definition
| Taxes income at an average rate that increases with income. |
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Term
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Definition
| Taxes income at an average rate that decreases with income. |
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Term
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Definition
| Taxes income at a constant average rate, regardless of the level of income. |
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Term
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Definition
| A tradeoff between equity and efficiency. |
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Term
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Definition
| A situation in which more than one event may occur but we don't know which one. |
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Term
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Definition
| A situation in which more than one outcome may occur and the probability of each possible outcome can be estimated. |
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Term
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Definition
| The amount of utility a person attaches to a given amount of wealth. |
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Term
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Definition
| The average utility arising from all possible outcomes. |
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Term
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Definition
| Data on prices, quantities, and qualities of goods and services and factors of production. |
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Term
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Definition
| The cost of acquiring information on prices, quantities, and qualities of goods and services and factors of production. |
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Term
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Definition
| The highest price that the buyer is willing to pay for a good. |
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Term
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Definition
| Information that is available to one person but is too costly for anyone else to obtain. |
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Term
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Definition
| When one of the parties to an agreement has an incentive after the agreement is made to act in a manner that brings additional benefits to himself or herself at the expense of the other party. |
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Term
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Definition
| The tendency for people to enter into agreements in which they can use their private information to their own advantage and to the disadvantage of the less informed party. |
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Term
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Definition
| An action taken outside a market that conveys information that can be used by that market. |
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Term
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Definition
| A market in which the actual price embodies all currently available relevant information. |
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