Exam 1: Chapters 1, 2, 3, 5, 7, and 8

question

absolute price level

answer

a measure of the overall price level of the economy as compared with the microeconomic concept of relative prices

question

barriers of entry

answer

structural, legal or regulatory characteristics of the market that keep the other firms from easily producing the same or similar produces at the same cost and that give a firm market power

question

circular flow model

answer

portrays the level of economic activity in a country as a flow of expenditures from the household sector to business firms as consumers purchase goods and services currently produced by these firms and sold in the countrys output markets

question

export spending (X)

answer

The total amount of spending on goods and services currently produced in one country and sold abroad to residents of other countries in a given period of time

question

fiscal policy

answer

changes in taxing and spending by the executive and legislative branches of a country's national government that can be used to either simulate of restrain the economy

question

government consumption expenditures and gross investment (G)

answer

total amount of spending by federal, state, and local governments on consumption outlays for goods and services, depreciation charges for existing structures and equipment, and investment capital outlays for newly acquired structures and equipment in a given period of time

question

Gross Domestic Product (GDP)

answer

The sum total of the value of all the goods and services produced in a nation

question

gross private domestic investment (I)

answer

The total amount of spending on nonresidential structures, equipment, and software; residential structures; and business inventories in a given period of time.

question

imperfect competition

answer

Market structures of monopolistic competition, oligopoly, and monopoly, in which firms have some degree of market power

question

import spending (M)

answer

The total amount of spending on goods and services currently produced in other countries and sold to residents of a given country in a given period of time.

question

inputs

answer

factors of production used to make specific goods and services

question

Macroeconomics

answer

the study of the economy as a whole, including topics such as inflation, unemployment, and economic growth

question

managerial economics

answer

Microeconomics applied to business decision making

question

market power

answer

the ability of a company to change prices and output like a monopolist

question

Markets

answer

the institutions and mechanisms used for buying and selling goods and services. 4 major types: perfect competition, monopolistic competition, oligopoly, monopoly

question

Microeconomics

answer

the study of the economic behavior and decision making of small units, such as individuals, families, and businesses

question

monetary policies

answer

policies used by a government to control the size of its money supply

question

monopolistic competition

answer

a market structure in which many firms sell products that are similar but not identical

question

Monopoly

answer

market structure characterized by a single producer; form of imperfect competition

question

Net Export Spending (F)

answer

The total amount of spending on exports minus the total amount of spending on imports in a given period of time

question

Oligopoly

answer

A market structure in which a few large firms dominate a market. must take rivals actions into account when developing their own competitive strtaegies

question

Outputs

answer

The final good or service that is delivered or provided to the consumer

question

perfect competition

answer

a market structure in which a large number of firms all produce the same product. ease of entry into the market

question

personal consumption expenditures (C)

answer

the expenditures of households for durable and nondurable consumer goods and services

question

prices

answer

the amount of money that has to be paid to acquire a given product

question

price-taker

answer

characteristic of a perfectly competitive firm in which the firm cannot influence the price of its product, but can sell any amount of its output at the price established by the market

question

profit

answer

the difference between total revenue and total cost

question

profit maximization

answer

assumed goal of firms which is to develop strategies to earn the largest amount of profit possible. can focus on revenues, costs, or both

question

relative prices

answer

the price of one good in terms of another good (how prices are defined in microeconomics)

question

demand

answer

functional relationship between the price of a good or service and the quantity demanded by consumers in a given period (all else held constant)

question

functional relationship

answer

The relationship between changes in an independent variable and changes in a dependent variable; a cause-and-effect relationship.

question

inferior good

answer

a good for which, other things equal, an increase in income leads to a decrease in demand

question

normal good

answer

a good for which, other things equal, an increase in income leads to an increase in demand

question

substitute goods

answer

an increase in the price of good Y increases demand for good X, and vice versa

question

complementary goods

answer

increase in the price of good Y decreases demand for good X, and vice versa

question

individual demand function

answer

The function that shows, in symbolic or mathematical terms, the variables that influence the quantity demanded of a particular product by an individual consumer.

question

Market Demand Function

answer

the function that shows, in symbolic or mathematical terms, the variables that influence the quantity demanded of a particular product by all consumers in the market and that is thus affected by the number of consumers in the market.

question

demand curve

answer

a graph of the relationship between the price of a good and the quantity demanded by consumers

question

Demand Shifters

answer

The variables in a demand function that are held constant when defining a given demand curve, but that would shift the demand curve if their values changed

question

negative/inverse relationship

answer

A relationship between two variables, graphed as a downward sloping line, where an increase in the value of one variable causes a decrease in the value of the other variable

question

change in quantity demanded

answer

change in quantity consumers purchase when the price of the good changes, all other factors held constant, pictured as a movement along a given demand curve

question

change in demand

answer

change in quantity purchased when one or more of the demand shifters change, pictured as a shift of the entire demand curve

question

horizontal summation of individual demand curves

answer

The process of deriving a market demand curve by adding the quantity demanded by each individual at every price to determine the market demand at every price

question

linear demand function

answer

a demand function graphed as a straight-line demand curve in which all the terms are either added or subtracted and no terms have exponents other than 1

question

supply

answer

functional relationship between the price of a good or service and the quantity supplied by producers in a given time period, all else held constant

question

individual supply function

answer

the function that shows, in symbolic or mathematical terms, the variables that influence the quantity supplied of a particular product by an individual producer

question

Market Supply Function

answer

The function that shows, in symbolic or mathematical terms, the variables that influence the quantity supplied of a particular product by all producers in the market and that is thus affected by the number of producers in the market

question

supply curve

answer

a graph of the relationship between the price of a good and the quantity supplied

question

Supply Shifters

answer

The other variables in a supply function that are held constant when defining a given supply curve, but that would cause that supply curve to shift if their values changed

question

positive (direct) relationship

answer

Relationship between two variables such that changes in one variable is associated with changes in the other in the same direction.

question

linear supply function

answer

A mathematical supply function, which graphs as a straight-line supply curve, in which all terms are either added or subtracted and no terms have exponents other than 1

question

change in quantity supplied

answer

the change in amount offered for sale in response to a change in price

question

change in supply

answer

A change in the quantity supplied of a good or service at every price; a shift of the supply curve to the left or right.

question

equilibrium price (Pe)

answer

the price that equates quantity supplied with quantity demanded

question

equilibrium quantity (Qe)

answer

the quantity at which quantity demanded and quantity supplied are equal for a certain price level

question

shortage

answer

A situation in which quantity demanded is greater than quantity supplied

question

surplus

answer

A situation in which quantity supplied is greater than quantity demanded

question

demand elasticity

answer

A quantitative measurement (coefficient) showing the percentage change in the quantity demanded of a particular product relative to the percentage change in any one of the variables included in the demand function for that product.

question

price elasticity of demand (ep)

answer

the percentage change in quantity demanded relative to a percentage change in its own price

question

total revenue

answer

The amount of money received by firms when they sell a good or service. TR = P x Q.

question

elastic demand

answer

the percentage change in quantity demanded is greater than the percentage change in price |ep| > 1

price increase results in lower total revenue

question

inelastic demand

answer

the percentage change in quantity demanded is less than the percentage change in price |ep| < 1

price increase results in higher total revenue

question

unitary elasticity (or unit elastic)

answer

percentage change in quantity demanded is exactly equal to the percentage change in price

question

arc price elasticity of demand

answer

A measurement of the price elasticity of demand where the base quantity or price is calculated as the average value of the starting and ending quantities or prices

question

Point Price Elasticity of Demand

answer

A measurement of the price elasticity of demand calculated at a point on the demand curve using infinitesimal changes in prices and quantities

question

Total Revenue Function

answer

The functional relationship that shows the total revenue (price times quantity) received by a producer as a function of the level of output.

question

average revenue

answer

total revenue divided by the quantity sold (equals price of the product)

question

average revenue function

answer

The functional relationship that shows the revenue per unit of output received by the producer at different levels of output

question

marginal revenue

answer

extra revenue from the sale of one additional unit of output, change in total revenue divided by change in output

question

marginal revenue function

answer

The functional relationship that shows the additional revenue a producer receives by selling an additional unit of output at different levels of output

question

perfectly inelastic demand

answer

zero elasticity of demand, illustrated by a vertical demand curve, no change in quantity demanded for any change in price

question

Perfectly (infinitely) elastic demand

answer

horizontal demand curve, the quantity demanded varies tremendously with any change in price

question

income elasticity of demand

answer

percentage change in the quantity demanded of a given good, X, relative to a percentage change in consumer income, assuming all other factors constant

question

necessity

answer

good with income elasticity between 0 and 1 where the expenditure on the good increases less than proportionately with changes in income

question

luxury

answer

a good with an income elasticity greater than 1, the expenditure on the good increases more than proportionately with changes in income

question

cross-price elasticity of demand

answer

percentage change in the quantity demanded of a given good, X, relative to the percentage change in the price of good Y. measures how the demand for one good varies with changes in price of another good

(-) is complementary (+)is substitute

question

advertising elasticity of demand

answer

percentage change in the quantity demanded of a good relative to the percentage change in advertising dollars spent on that good

question

production function

answer

the relationship between quantity of inputs used to make a good and the quantity of output of that good

question

fixed input

answer

an input whose quantity is fixed for a period of time and cannot be varied

question

variable input

answer

an input whose quantity the firm can vary at any time

question

short run production function

answer

A production process that uses at least one fixed input

question

long run production function

answer

A production process in which all inputs are variable

question

total product

answer

the total quantity of a good produced in a given period

question

average product

answer

amount of output per unit of variable input

question

marginal product

answer

additional output produced with an additional unit of variable input

question

increasing marginal returns

answer

results in that region of the marginal product curve where the curve is positive and increasing, so that total product increases at an increasing rate

question

Law of Diminishing Marginal Returns

answer

the phenomenon illustrated by that region of the marginal product curve where the curve is positive but decreasing so product is increasing at decreasing rate

question

negative marginal returns

answer

curve is negative and decreasing, total product is decreasing

question

Cost Function

answer

a graph that shows how much various amounts of production cost, and level of output

question

opportunity cost

answer

economic measure of cost that reflects the use of resources in one activity, such as a production process by one firm, in terms of the opportunities forgone in undertaking the next best alternate activity

question

explicit cost

answer

a cost that involves spending money

question

implicit cost

answer

A firm's opportunity cost of using its own resources or those provided by its owners without a corresponding cash payment

question

historical cost

answer

the actual amount paid for merchandise or other items bought is recorded

question

accounting profit

answer

total revenue minus total explicit cost

question

economic profit

answer

total revenue - explicit costs - implicit costs

question

short-run cost function

answer

A cost function for a short-run production process in which there is at least one fixed input of production

question

total fixed cost

answer

all the expenses that remain the same no matter how many products are made or sold

question

total variable cost

answer

the sum of those changing expenses that are closely related to output

question

total cost

answer

the sum of fixed and variable costs

question

average fixed cost

answer

fixed cost divided by the quantity of output

question

average total cost

answer

total cost divided by the quantity of output, also average fixed cost plus average variable cost

question

marginal cost

answer

the cost of producing one more unit of a good

question

profit-maximizing rule

answer

All firms maximize profit by producing where Marginal Revenue = Marginal Cost

question

marginal revenue for the perfectly competitive firm

answer

marginal revenue curve for the perfectly competitive firm is horizontal b/c the firm can sell all units of output at the market price. price = marginal revenue

question

shutdown point for the perfectly competitive firm

answer

The price, which equals a firm's minimum average variable cost, below which it is more profitable for the perfectly competitive firm to shut down than to continue to produce.

question

supply curve for the perfectly competitive firm

answer

The portion of a firm's marginal cost curve that lies above the minimum average variable cost.

question

supply curve for the perfectly competitive industry

answer

curve that shows the output produced by all perfectly competitive firms in the industry at different prices

question

equilibrium point for the perfectly competitive firm

answer

price = average total cost because the firm earns zero economic profit at this point

question

economies of scale

answer

achieving lower unit costs of production by adopting a larger scale of production, represented by the downward sloping portion of a long-run average cost curve

question

diseconomies of scale

answer

the situation in which a firm's long-run average costs rise as the firm increases output

question

industry concentration

answer

A measure of how many firms produce the total output of an industry. The more concentrated the industry, the fewer the firms operating in that industry.

question

price-cost margin

answer

relationship between price and cost for an industry. subtract total payroll and cost of materials from the value of shipments, then divide results by the value of the shipments

question

price setter

answer

firm in imperfect competition that faces a downward sloping demand curve and must set the profit-maximizing price to charge for its product

question

barriers to entry

answer

structural, legal, or regulatory characteristics of a firm and its market that keep the other firms from producing the same or similar products at the same cost

question

lock-in and switching costs

answer

form of market power for a firm in which consumers become locked into purchasing certain types or brands or products because they would incur substantial costs if they switched to other products

question

network externalities

answer

a barrier to entry that exists because the value of a product to consumers depends on the number of consumers using the product

question

learner index

answer

measure of market power that focuses on the difference between a firm's product price and its marginal cost of production

question

concentration ratios

answer

a measure of market power that focuses on the share of the market held by the X largest firms, where X typically equals 4, 6, or 8

question

Herfindahl-Hirschman Index

answer

measure of market power that is defined as the sum of the squares of the market share of each firm in an industry

question

antitrust laws

answer

legislation, beginning with the Sherman Act of 1890, that attempts to limit the market power of firms and to regulate how firms use their market power to compete with each other

1 of 120

question

absolute price level

answer

a measure of the overall price level of the economy as compared with the microeconomic concept of relative prices

question

barriers of entry

answer

structural, legal or regulatory characteristics of the market that keep the other firms from easily producing the same or similar produces at the same cost and that give a firm market power

question

circular flow model

answer

question

export spending (X)

answer

The total amount of spending on goods and services currently produced in one country and sold abroad to residents of other countries in a given period of time

question

fiscal policy

answer

changes in taxing and spending by the executive and legislative branches of a country's national government that can be used to either simulate of restrain the economy

question

government consumption expenditures and gross investment (G)

answer

question

Gross Domestic Product (GDP)

answer

The sum total of the value of all the goods and services produced in a nation

question

gross private domestic investment (I)

answer

The total amount of spending on nonresidential structures, equipment, and software; residential structures; and business inventories in a given period of time.

question

imperfect competition

answer

Market structures of monopolistic competition, oligopoly, and monopoly, in which firms have some degree of market power

question

import spending (M)

answer

The total amount of spending on goods and services currently produced in other countries and sold to residents of a given country in a given period of time.

question

inputs

answer

factors of production used to make specific goods and services

question

Macroeconomics

answer

the study of the economy as a whole, including topics such as inflation, unemployment, and economic growth

question

managerial economics

answer

Microeconomics applied to business decision making

question

market power

answer

the ability of a company to change prices and output like a monopolist

question

Markets

answer

the institutions and mechanisms used for buying and selling goods and services. 4 major types: perfect competition, monopolistic competition, oligopoly, monopoly

question

Microeconomics

answer

the study of the economic behavior and decision making of small units, such as individuals, families, and businesses

question

monetary policies

answer

policies used by a government to control the size of its money supply

question

monopolistic competition

answer

a market structure in which many firms sell products that are similar but not identical

question

Monopoly

answer

market structure characterized by a single producer; form of imperfect competition

question

Net Export Spending (F)

answer

The total amount of spending on exports minus the total amount of spending on imports in a given period of time

question

Oligopoly

answer

A market structure in which a few large firms dominate a market. must take rivals actions into account when developing their own competitive strtaegies

question

Outputs

answer

The final good or service that is delivered or provided to the consumer

question

perfect competition

answer

a market structure in which a large number of firms all produce the same product. ease of entry into the market

question

personal consumption expenditures (C)

answer

the expenditures of households for durable and nondurable consumer goods and services

question

prices

answer

the amount of money that has to be paid to acquire a given product

question

price-taker

answer

characteristic of a perfectly competitive firm in which the firm cannot influence the price of its product, but can sell any amount of its output at the price established by the market

question

profit

answer

the difference between total revenue and total cost

question

profit maximization

answer

assumed goal of firms which is to develop strategies to earn the largest amount of profit possible. can focus on revenues, costs, or both

question

relative prices

answer

the price of one good in terms of another good (how prices are defined in microeconomics)

question

demand

answer

functional relationship between the price of a good or service and the quantity demanded by consumers in a given period (all else held constant)

question

functional relationship

answer

The relationship between changes in an independent variable and changes in a dependent variable; a cause-and-effect relationship.

question

inferior good

answer

a good for which, other things equal, an increase in income leads to a decrease in demand

question

normal good

answer

a good for which, other things equal, an increase in income leads to an increase in demand

question

substitute goods

answer

an increase in the price of good Y increases demand for good X, and vice versa

question

complementary goods

answer

increase in the price of good Y decreases demand for good X, and vice versa

question

individual demand function

answer

The function that shows, in symbolic or mathematical terms, the variables that influence the quantity demanded of a particular product by an individual consumer.

question

Market Demand Function

answer

question

demand curve

answer

a graph of the relationship between the price of a good and the quantity demanded by consumers

question

Demand Shifters

answer

The variables in a demand function that are held constant when defining a given demand curve, but that would shift the demand curve if their values changed

question

negative/inverse relationship

answer

A relationship between two variables, graphed as a downward sloping line, where an increase in the value of one variable causes a decrease in the value of the other variable

question

change in quantity demanded

answer

change in quantity consumers purchase when the price of the good changes, all other factors held constant, pictured as a movement along a given demand curve

question

change in demand

answer

change in quantity purchased when one or more of the demand shifters change, pictured as a shift of the entire demand curve

question

horizontal summation of individual demand curves

answer

The process of deriving a market demand curve by adding the quantity demanded by each individual at every price to determine the market demand at every price

question

linear demand function

answer

a demand function graphed as a straight-line demand curve in which all the terms are either added or subtracted and no terms have exponents other than 1

question

supply

answer

functional relationship between the price of a good or service and the quantity supplied by producers in a given time period, all else held constant

question

individual supply function

answer

the function that shows, in symbolic or mathematical terms, the variables that influence the quantity supplied of a particular product by an individual producer

question

Market Supply Function

answer

question

supply curve

answer

a graph of the relationship between the price of a good and the quantity supplied

question

Supply Shifters

answer

The other variables in a supply function that are held constant when defining a given supply curve, but that would cause that supply curve to shift if their values changed

question

positive (direct) relationship

answer

Relationship between two variables such that changes in one variable is associated with changes in the other in the same direction.

question

linear supply function

answer

A mathematical supply function, which graphs as a straight-line supply curve, in which all terms are either added or subtracted and no terms have exponents other than 1

question

change in quantity supplied

answer

the change in amount offered for sale in response to a change in price

question

change in supply

answer

A change in the quantity supplied of a good or service at every price; a shift of the supply curve to the left or right.

question

equilibrium price (Pe)

answer

the price that equates quantity supplied with quantity demanded

question

equilibrium quantity (Qe)

answer

the quantity at which quantity demanded and quantity supplied are equal for a certain price level

question

shortage

answer

A situation in which quantity demanded is greater than quantity supplied

question

surplus

answer

A situation in which quantity supplied is greater than quantity demanded

question

demand elasticity

answer

question

price elasticity of demand (ep)

answer

the percentage change in quantity demanded relative to a percentage change in its own price

question

total revenue

answer

The amount of money received by firms when they sell a good or service. TR = P x Q.

question

elastic demand

answer

the percentage change in quantity demanded is greater than the percentage change in price |ep| > 1

price increase results in lower total revenue

question

inelastic demand

answer

the percentage change in quantity demanded is less than the percentage change in price |ep| < 1

price increase results in higher total revenue

question

unitary elasticity (or unit elastic)

answer

percentage change in quantity demanded is exactly equal to the percentage change in price

question

arc price elasticity of demand

answer

A measurement of the price elasticity of demand where the base quantity or price is calculated as the average value of the starting and ending quantities or prices

question

Point Price Elasticity of Demand

answer

A measurement of the price elasticity of demand calculated at a point on the demand curve using infinitesimal changes in prices and quantities

question

Total Revenue Function

answer

The functional relationship that shows the total revenue (price times quantity) received by a producer as a function of the level of output.

question

average revenue

answer

total revenue divided by the quantity sold (equals price of the product)

question

average revenue function

answer

The functional relationship that shows the revenue per unit of output received by the producer at different levels of output

question

marginal revenue

answer

extra revenue from the sale of one additional unit of output, change in total revenue divided by change in output

question

marginal revenue function

answer

The functional relationship that shows the additional revenue a producer receives by selling an additional unit of output at different levels of output

question

perfectly inelastic demand

answer

zero elasticity of demand, illustrated by a vertical demand curve, no change in quantity demanded for any change in price

question

Perfectly (infinitely) elastic demand

answer

horizontal demand curve, the quantity demanded varies tremendously with any change in price

question

income elasticity of demand

answer

percentage change in the quantity demanded of a given good, X, relative to a percentage change in consumer income, assuming all other factors constant

question

necessity

answer

good with income elasticity between 0 and 1 where the expenditure on the good increases less than proportionately with changes in income

question

luxury

answer

a good with an income elasticity greater than 1, the expenditure on the good increases more than proportionately with changes in income

question

cross-price elasticity of demand

answer

question

advertising elasticity of demand

answer

percentage change in the quantity demanded of a good relative to the percentage change in advertising dollars spent on that good

question

production function

answer

the relationship between quantity of inputs used to make a good and the quantity of output of that good

question

fixed input

answer

an input whose quantity is fixed for a period of time and cannot be varied

question

variable input

answer

an input whose quantity the firm can vary at any time

question

short run production function

answer

A production process that uses at least one fixed input

question

long run production function

answer

A production process in which all inputs are variable

question

total product

answer

the total quantity of a good produced in a given period

question

average product

answer

amount of output per unit of variable input

question

marginal product

answer

additional output produced with an additional unit of variable input

question

increasing marginal returns

answer

results in that region of the marginal product curve where the curve is positive and increasing, so that total product increases at an increasing rate

question

Law of Diminishing Marginal Returns

answer

the phenomenon illustrated by that region of the marginal product curve where the curve is positive but decreasing so product is increasing at decreasing rate

question

negative marginal returns

answer

curve is negative and decreasing, total product is decreasing

question

Cost Function

answer

a graph that shows how much various amounts of production cost, and level of output

question

opportunity cost

answer

question

explicit cost

answer

a cost that involves spending money

question

implicit cost

answer

A firm's opportunity cost of using its own resources or those provided by its owners without a corresponding cash payment

question

historical cost

answer

the actual amount paid for merchandise or other items bought is recorded

question

accounting profit

answer

total revenue minus total explicit cost

question

economic profit

answer

total revenue - explicit costs - implicit costs

question

short-run cost function

answer

A cost function for a short-run production process in which there is at least one fixed input of production

question

total fixed cost

answer

all the expenses that remain the same no matter how many products are made or sold

question

total variable cost

answer

the sum of those changing expenses that are closely related to output

question

total cost

answer

the sum of fixed and variable costs

question

average fixed cost

answer

fixed cost divided by the quantity of output

question

average total cost

answer

total cost divided by the quantity of output, also average fixed cost plus average variable cost

question

marginal cost

answer

the cost of producing one more unit of a good

question

profit-maximizing rule

answer

All firms maximize profit by producing where Marginal Revenue = Marginal Cost

question

marginal revenue for the perfectly competitive firm

answer

marginal revenue curve for the perfectly competitive firm is horizontal b/c the firm can sell all units of output at the market price. price = marginal revenue

question

shutdown point for the perfectly competitive firm

answer

The price, which equals a firm's minimum average variable cost, below which it is more profitable for the perfectly competitive firm to shut down than to continue to produce.

question

supply curve for the perfectly competitive firm

answer

The portion of a firm's marginal cost curve that lies above the minimum average variable cost.

question

supply curve for the perfectly competitive industry

answer

curve that shows the output produced by all perfectly competitive firms in the industry at different prices

question

equilibrium point for the perfectly competitive firm

answer

price = average total cost because the firm earns zero economic profit at this point

question

economies of scale

answer

achieving lower unit costs of production by adopting a larger scale of production, represented by the downward sloping portion of a long-run average cost curve

question

diseconomies of scale

answer

the situation in which a firm's long-run average costs rise as the firm increases output

question

industry concentration

answer

A measure of how many firms produce the total output of an industry. The more concentrated the industry, the fewer the firms operating in that industry.

question

price-cost margin

answer

relationship between price and cost for an industry. subtract total payroll and cost of materials from the value of shipments, then divide results by the value of the shipments

question

price setter

answer

firm in imperfect competition that faces a downward sloping demand curve and must set the profit-maximizing price to charge for its product

question

barriers to entry

answer

structural, legal, or regulatory characteristics of a firm and its market that keep the other firms from producing the same or similar products at the same cost

question

lock-in and switching costs

answer

form of market power for a firm in which consumers become locked into purchasing certain types or brands or products because they would incur substantial costs if they switched to other products

question

network externalities

answer

a barrier to entry that exists because the value of a product to consumers depends on the number of consumers using the product

question

learner index

answer

measure of market power that focuses on the difference between a firm's product price and its marginal cost of production

question

concentration ratios

answer

a measure of market power that focuses on the share of the market held by the X largest firms, where X typically equals 4, 6, or 8

question

Herfindahl-Hirschman Index

answer

measure of market power that is defined as the sum of the squares of the market share of each firm in an industry

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antitrust laws

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legislation, beginning with the Sherman Act of 1890, that attempts to limit the market power of firms and to regulate how firms use their market power to compete with each other

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