| Term | Definition |
|---|---|
| barriers to entry | Obstacles that prevent new firms from entering a market, allowing existing firms to maintain market power. |
| exclusive ownership of key resources | Control of essential inputs or assets by existing firms that prevents new competitors from entering the market. |
| fixed costs | Costs that do not change regardless of the level of output produced, such as rent or equipment purchases. |
| imperfectly competitive markets | Markets where individual firms have some degree of market power and can influence prices, including monopolistic competition, oligopoly, and monopoly. |
| inefficiency | A situation where resources are not being used optimally, resulting in production at a point inside the production possibilities curve. |
| legal barriers to entry | Government-imposed restrictions or regulations that prevent or limit new firms from entering a market. |
| marginal benefits | The additional benefit or satisfaction gained from consuming or producing one more unit of a good. |
| marginal costs | The additional cost incurred from producing one more unit of output. |
| monopolistic competition | A market structure with many firms producing differentiated products, free entry and exit, and some degree of market power. |
| monopoly | A market structure with one firm that produces a unique product with no close substitutes and has significant market power. |
| monopsony | A market structure with one buyer facing many sellers, giving the buyer significant power to influence price. |
| oligopoly | A market structure dominated by a few large firms whose decisions significantly affect each other and market outcomes. |
| start-up costs | Initial expenses required to begin operations in an industry, which can serve as a barrier to entry for new firms. |
| Term | Definition |
|---|---|
| barriers to entry | Obstacles that prevent new firms from entering a market, allowing existing firms to maintain market power. |
| consumer surplus | The difference between the maximum price consumers are willing to pay for a good and the actual price they pay, representing the benefit consumers receive from purchasing at market price. |
| deadweight loss | The loss of economic efficiency that occurs when equilibrium is not at the socially optimal quantity, resulting in reduced total surplus. |
| economies of scale | The cost advantages that a firm experiences as it increases production, resulting in lower average costs per unit. |
| equilibrium | The market condition where the quantity supplied equals the quantity demanded, resulting in a stable price with no tendency to change. |
| firm decision making | The process by which firms determine production levels and pricing strategies to maximize profit or minimize losses. |
| imperfectly competitive markets | Markets where individual firms have some degree of market power and can influence prices, including monopolistic competition, oligopoly, and monopoly. |
| inefficient outputs | Production levels that do not maximize total surplus and result in deadweight loss in the market. |
| marginal costs | The additional cost incurred from producing one more unit of output. |
| marginal revenue | The additional revenue a firm receives from selling one more unit of output. |
| monopoly | A market structure with one firm that produces a unique product with no close substitutes and has significant market power. |
| natural monopoly | A market where one firm can produce the entire market output at a lower cost than multiple firms due to economies of scale. |
| producer surplus | The difference between the actual price received by a producer and the minimum price at which they are willing to supply a good, representing the benefit producers receive from selling at market price. |
| profit | The difference between total revenue and total cost, representing the financial gain or loss from economic activity. |
| Term | Definition |
|---|---|
| consumer surplus | The difference between the maximum price consumers are willing to pay for a good and the actual price they pay, representing the benefit consumers receive from purchasing at market price. |
| deadweight loss | The loss of economic efficiency that occurs when equilibrium is not at the socially optimal quantity, resulting in reduced total surplus. |
| economic surplus | The sum of consumer surplus and producer surplus; total economic surplus is maximized at the socially optimal quantity. |
| equilibrium | The market condition where the quantity supplied equals the quantity demanded, resulting in a stable price with no tendency to change. |
| firm decision making | The process by which firms determine production levels and pricing strategies to maximize profit or minimize losses. |
| imperfectly competitive markets | Markets where individual firms have some degree of market power and can influence prices, including monopolistic competition, oligopoly, and monopoly. |
| marginal costs | The additional cost incurred from producing one more unit of output. |
| market power | The ability of a firm to influence the price of a product by changing the quantity it supplies. |
| perfect price discrimination | A pricing strategy where a monopolist charges each consumer the maximum price they are willing to pay, capturing all consumer surplus. |
| price discrimination | The practice of charging different prices to different consumers for the same product based on their willingness to pay. |
| producer surplus | The difference between the actual price received by a producer and the minimum price at which they are willing to supply a good, representing the benefit producers receive from selling at market price. |
| profit | The difference between total revenue and total cost, representing the financial gain or loss from economic activity. |
| Term | Definition |
|---|---|
| advertising | A marketing strategy used by firms to promote their products and create product differentiation in the minds of consumers. |
| allocative inefficiency | A market condition where the price does not equal marginal cost, resulting in a suboptimal allocation of resources and deadweight loss. |
| average total costs | The total cost of production divided by the quantity of output produced. |
| consumer surplus | The difference between the maximum price consumers are willing to pay for a good and the actual price they pay, representing the benefit consumers receive from purchasing at market price. |
| deadweight loss | The loss of economic efficiency that occurs when equilibrium is not at the socially optimal quantity, resulting in reduced total surplus. |
| differentiated products | Goods that are perceived as distinct from competitors' products due to differences in quality, features, branding, or other characteristics. |
| economic profit | The difference between total revenue and total economic cost, including both explicit and implicit costs. |
| equilibrium | The market condition where the quantity supplied equals the quantity demanded, resulting in a stable price with no tendency to change. |
| excess capacity | The situation where a firm produces at a level below the output that minimizes average total costs, leaving productive capacity unused. |
| firm decision making | The process by which firms determine production levels and pricing strategies to maximize profit or minimize losses. |
| free entry and exit | The ability of firms to enter or leave a market without significant barriers or restrictions. |
| imperfectly competitive markets | Markets where individual firms have some degree of market power and can influence prices, including monopolistic competition, oligopoly, and monopoly. |
| marginal costs | The additional cost incurred from producing one more unit of output. |
| monopolistic competition | A market structure with many firms producing differentiated products, free entry and exit, and some degree of market power. |
| producer surplus | The difference between the actual price received by a producer and the minimum price at which they are willing to supply a good, representing the benefit producers receive from selling at market price. |
| profit | The difference between total revenue and total cost, representing the financial gain or loss from economic activity. |
| Term | Definition |
|---|---|
| barriers to entry | Obstacles that prevent new firms from entering a market, allowing existing firms to maintain market power. |
| cartel | An agreement among firms to collude and coordinate their actions to reduce competition. |
| dominant strategy | A strategy that yields the highest payoff for a player regardless of what action the other player takes. |
| duopoly | A market structure with two firms acting interdependently. |
| game | A situation in which multiple individuals take actions and each individual's payoff depends on both their own choice and the choices of others. |
| Nash equilibrium | A condition where no player can increase their payoff by unilaterally changing their action, given the other players' actions. |
| normal form model | A representation of a game that displays the payoffs resulting from each possible combination of strategies chosen by all players. |
| oligopoly | A market structure dominated by a few large firms whose decisions significantly affect each other and market outcomes. |
| payoff | The outcome or reward that a player receives as a result of the strategies chosen by all players in a game. |
| perfect competition | A market structure with many firms, homogeneous products, free entry and exit, and firms that are price takers. |
| Prisoner's Dilemma | A game theory scenario in which individual incentives lead players away from a cooperative outcome that would benefit all players. |
| strategy | A complete plan of actions for playing a game that determines a player's choice in each possible situation. |