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antitrust laws
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A set of laws that regulate market structure and the competitive behavior of firms
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Price fixing
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an attempt by two or more firms to cooperate in setting prices
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horizontal merger
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merger of firms that compete in the same market
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vertical merger
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merger of firms with a supplier-merger relationship
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conglomerate merger
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Merger of firms in unrelated markets
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Vertical Restraints
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competition restrictions in agreements between firms or individuals at different levels of the production and distribution process.
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rate of return
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A firm's accounting profit expressed as a percentage of its net worth
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price discrimination
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the business practice of selling the same good at different prices to different customers
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derived demand
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Demand for an input that reflects the demand for the product the input produces
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Marginal Physical Product
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the increase in output that results from a one-unit increase in the input of that resource
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Marginal Revenue Product
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a value that measures the addition to a company's revenue that results from the use of each worker
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Value of marginal product
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Marginal physical product multiplied by the product's per-unit price
VMP = (MPP x Per-unit price)
VMP = (MPP x Per-unit price)
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Marginal Resource Cost
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The amount by which a firm's total resource cost increases when the firm uses an additional unit of a given resource
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Monopsony
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a market structure in which there is only a single buyer of a good or service
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human capital
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Capital in the form of abilities acquired through formal training, education, or on-the-job experience
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efficiency wage theory
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The idea that higher wages can raise productivity by enough to increase profit
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rate of return on capital
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The marginal product of capital expressed as an annual percentage rate
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time preference
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the desire to have goods and services sooner rather than later (all else being equal)
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pure economic rent
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the payment for any resource that is fixed in supply
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Inframarginal rent
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The difference between the payment made to a unit of resource and the minimum needed to attract it to the use in question
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expected value
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For a set of possible outcomes, the sum of the probability of each outcome multiplied by the value of that outcome
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risk aversion
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A preference for a certain outcome with a given value over a set of risky outcomes with the same expected value
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risk preference
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A preference for a set of risky outcomes with a given expected value over a certain outcome with the same expected value
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risk neutrality
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Indifference between a certain outcome with a given value and a set of risky outcomes with the same expected value
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risk pooling
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A technique in which the risk of loss is shared among many people so that the impact of a loss on any one of them is small
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information asymmetry
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A situation in which some parties to a transaction have relevant information that other parties do not have
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Adverse Selection
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The tendency of people facing the greatest risk of loss to be most likely to seek insurance
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Moral Hazard
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The tendency of people to expose themselves to risk if they know insurance will cover their losses
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speculation
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Buying something at a low price in the hope of selling it later at a higher price
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futures contract
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An agreement to exchange something at a specified date in the future at a price that the parties agree on now
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spot price
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The price at which sellers offer a good for immediate sale
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option
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A contract under which one party obtains the right (but not the obligation) to buy or sell something from another party at a specified date in the future at a price on which they agree now
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hedging
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An operation in which futures markets or options markets are used to offset one risk with another
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English auction
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An auction in which bidding starts low and proceeds until the good is sold to the highest bidder
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Dutch auction
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An auction that begins with a high bid, which is lowered until a buyer is found
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sealed-bid auction
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An auction in which all buyers submit bids at the same time, and the item is sold to the highest bidder
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reservation price
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The maximum price that a buyer is willing to pay for a good or the minimum price at which a seller is willing to offer it
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labor market discrimination
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the valuation in the labor market of personal characteristics of applicants and workers that are unrelated to productivity
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labor union
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An organization of workers that tries to improve working conditions, wages, and benefits for its members
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