| A | B |
|---|
| Monopoly | A market structure in which one firm is the sole producer of a good with no close substitutes in a market with entry barriers. |
| Barrier to Entry | Something that prevents other firms from entering an industry. Typical barriers include economies of scale, control over scarce inputs, technological superiority, and barriers created by government. |
| Patent | A temporary monopoly given by the government to an inventor for the use or sale of an invention. |
| Market Power | The ability to set the price above the perfectly competitive level. |
| Natural Monopoly | The case where economies of scale are so extensive that it is less costly for one firm to supply the entire range of demand than for multiple firms to share the market. |
| Monopoly Long Run Equilibrium | Pm > MR = MC, so output is not allocatively efficient. Deadweight loss exists. Pm > ATC, so this is not productively efficient. Economic profit is greater than zero, so consumer surplus is transferred to the firm as profit. |
| Price Discrimination | The sale of the same product to different groups of consumers at different prices. |
| Imperfect Competition | A market structure in which firms have market power to affect prices. |
| Monopolistic Competition | A market structure characterized by a few small firms producing a differentiated product with easy entry into the market. |
| Monopolistic Competition Long Run Equilibrium | Pmc > MR = MC, so the firm is not allocative efficiency. Pmc = ATC, so economic profit equals zero. Pmc > efficient scale, so the firm is not productively efficient. |
| Product Differentiation | The strategy of creating real or perceived differences in a firm's product in order to increase sales. |
| Nonprice Competition | Competition occurs between firms in areas not related to price. These areas can include advertising, new product features, or research. |
| Excess Capacity | The difference between the long-run output in monopolistic competition and the output at minimum average total cost. |
| Oligopoly | A very diverse market structure characterized by a small number of interdependent large firms, producing either a standardized or differentiated product in a market with a barrier to entry. |
| Interdependence | The relationship among firms when their decisions significantly affect one another's profits. A key characteristic of oligopolies. |
| Four-firm Concentration Ratio | The sum of the market share of the four largest firms in an industry. |
| Market Share | The fraction of the total industry output accounted for by a given firm's output. |
| Noncollusive Oligopoly | Models of industries in which firms are competitive rivals seeking to gain at the expense of their rivals. |
| Tacit Collusion | Cooperation among producers, without a formal agreement, to limit production and raise prices so as to raise one another's profits. |
| Nash Equilibrium | In game theory, the equilibrium that results when all players choose the action that maximizes their payoffs, given the actions of other players. |
| Prisoners' Dilemma | A game where the two rivals achieve a less desirable outcome because they are unable to coordinate their strategies. |
| Dominant Strategy | A strategy that is always the best strategy to pursue, regardless of what a rival is doing. |
| Collusive Oligopoly | Models where firms agree to work together to mutually improve their situations. |
| Duopoly | An oligopoly consisting of only two firms. |
| Strategic Behavior | Actions taken by a firm that attempt to influence the future behavior of other firms. |
| Cartel | A group of firms that agree to maximize their joint profits rather than compete. |
