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Perfect Competition
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occurs in an industry when that industry is made up of many small firms producing homogeneous products, information is perfect, and there is no impediment to entry or exit of firms
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Price Taker
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the firm has no choice but to accept the price that has been determined in the market
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Variable Cost
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a cost borne by a supplier whose total amount changes when the quantity of output of the supplier changes
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Supply Curve of a Firm
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shows the different quantities of output that the firm would be willing to supply at different possible prices during some period of time
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Supply Curve of an Industry
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shows the different quantities of output that the industry would supply at different possible prices during some given period of time
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Economic Profit
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equals net earnings, in the accountant's sense, minus the opportunity costs of the capital and of any other inputs supplied by the firm's owners
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Pure Monopoly
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an industry in which there is only one supplier of a product for which there are no close substitutes and in which it is very hard or impossible for another firm to coexist
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Barriers to Entry
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attributes of a market that make it more difficult or expensive for a new firm to open for business than it was for firms already present in the market
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Patents
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a privilege granted to an inventor, whether an individual or a firm, that for a specified period of time prohibits anyone else from producing or using that invention without the permission of the holder of the patent
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Natural Monopoly
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an industry in which advantages of large-scale production make it possible for a single firm to produce the entire output of the market at lower average cost than a number of firms each producing a smaller quantity
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Monopoly Profits
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any excess of the profits earned persistently by a monopoly firm over and above those that would be earned if the industry were perfectly competitive
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Monopolistic Competition
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a market in which products are heterogeneous but which is otherwise the same as a market that is perfectly competitive
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Oligopoly
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a market dominated by a few sellers, at least several of which are large enough relative to the total market to be able to influence the market price
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Cartel
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a group of sellers of a product who have joined together to control its production, sale, and price in the hope of obtaining the advantages of monopoly
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Price Leadership
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one firm sets the price for the industry and the others follow
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Price War
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each competing firm is determined to sell at a price that is lower than the prices of its rivals, usually regardless of whether that price covers the pertinent cost
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Sales Maximization
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a description of the firm's objective if it seeks to adopt prices and output quantities that make its total revenue, rather than its profits, as large as possible
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Kinked Demand Curve
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a demand curve that changes its slope abruptly at some level of output
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Sticky Price
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prices that do not change often even when there is moderate change in cost
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Payoff Matrix
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shows how much each of two competitors (players) can expect to earn
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Dominant Strategy
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a strategy for one of the competitors in a game that will yield a higher payoff than any other strategies that are possible, no matter what choice of strategy is made by competitors
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Maximum Criterion
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requires you to select the strategy that yields the maximum payoff on the assumption that your opponent does as much damage to you as he or she can
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Nash Equilibrium
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each player adopts the strategy that gives her the highest possible payoff if her rival sticks to the strategy he has chosen
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Marginal Revenue Product of Labor
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the increase in the employer's total revenue that results when he hires an additional unit of labor
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Investment in Human Capital
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an expenditure on an individual that increases that person's future earning power or productivity
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Substitution Effect
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in labor supply, the resulting incentive of a wage increase to work more because of the higher relative reward to labor
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Income Effect
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in labor supply, the resulting rise of workers' purchasing power that enable them to afford more leisure due to a wage increase
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Labor Union
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an organization made up of a group of workers that represent the workers in negotiations with employers over issues such as wages, vacations and sick leave
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Monopsony
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a market situation in which there is only one buyer
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Bilateral Monopoly
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a market situation in which there is both a monopoly on the selling side and a monopsony on the buying side
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Poverty Line
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an amount of income below which a family is considered "poor"
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Economic Discrimination
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occurs when equivalent factors of production receive different payments for equal contributions to output
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Affirmative Action
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active efforts to locate and hire members of underrepresented groups
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