Microeconomics: Chapter 13: Monopolistic Competition and Oligopoly - Custom Scholars
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Microeconomics: Chapter 13: Monopolistic Competition and Oligopoly

question
monopolistic competition
answer
a market structure in which many firms sell a differentiated product, entry is relatively easy, each firm has some control over its product price, and there is considerable nonprice competition
question
product differentiation
answer
a strategy in which one firm's product is distinguished from competing products by means of its design, related services, quality, location, or other attributes (except price)
question
nonprice competition
answer
competition based on distinguishing one's product by means of product differentiation and then advertising the distinguished product to consumers
question
four firm concentration ratio
answer
the percentage of total industry sales accounted for by the top four firms in an industry
question
Herfindahl index
answer
a measure of the concentration and competitiveness of an industry; calculated as the sum of the squared percentage market shares of the individual firms in the industry
question
excess capacity
answer
plant resources that are underused when imperfectly competitive firms produce less output than that associated with achieving minimum average total cost
question
oligopoly
answer
market structure in which a few firms sell either a standardized or differentiated product into which entry is difficult, in which firms have limited control over product price because of mutual interdependence, and in which there is typically nonprice competition
question
homogenous oligopoly
answer
oligopoly in which firms produce a standardized product
question
differentiated oligopoly
answer
oligopoly whereby a firm produces a differentiated product
question
strategic behavior
answer
self interested economic actions that take into account the expected reactions of others
question
mutual interdependence
answer
a situation in which a change in price strategy by one firm will affect the sales and profits of another firm; any firm that makes such a change can expect its rivals to react to the change
question
interindustry competition
answer
the competition for sales between the products of one industry and the products of another industry
question
import competition
answer
competition that domestic firm encounter from the products and services from foreign producers
question
game theory
answer
the study of how people behave in strategic situations in which individuals must take into account not only their own possible actions but also the possible reactions of others
question
collusion
answer
a situation in which firms act together and in agreement to fix prices, divide a market, or otherwise restrict competition
question
kinked demand curve
answer
a demand curve that has a flatter slope above the current price than below the current price'; applies to a noncollusive oligopoly firm if its rivals will match any price decrease but ignore any price increase
question
price war
answer
successive, competitive, and continued decreases in the prices charged by firms in an oligopolistic industry; at each stage of the price war, one firm lowers its price below its rivals price, hoping to increase sales and revenues at its rivals' expense
question
cartel
answer
formal agreement among firms in an industry to set the price of a product and establish the outputs of the individual firms or to divide the market for the product geographically
question
price leadership
answer
an informal method that firms in an oligopoly may employ to set the price of their product: one firm is the first to announce a change in price and the other firms soon announce identical or similar changes
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question
monopolistic competition
answer
a market structure in which many firms sell a differentiated product, entry is relatively easy, each firm has some control over its product price, and there is considerable nonprice competition
question
product differentiation
answer
a strategy in which one firm's product is distinguished from competing products by means of its design, related services, quality, location, or other attributes (except price)
question
nonprice competition
answer
competition based on distinguishing one's product by means of product differentiation and then advertising the distinguished product to consumers
question
four firm concentration ratio
answer
the percentage of total industry sales accounted for by the top four firms in an industry
question
Herfindahl index
answer
a measure of the concentration and competitiveness of an industry; calculated as the sum of the squared percentage market shares of the individual firms in the industry
question
excess capacity
answer
plant resources that are underused when imperfectly competitive firms produce less output than that associated with achieving minimum average total cost
question
oligopoly
answer
market structure in which a few firms sell either a standardized or differentiated product into which entry is difficult, in which firms have limited control over product price because of mutual interdependence, and in which there is typically nonprice competition
question
homogenous oligopoly
answer
oligopoly in which firms produce a standardized product
question
differentiated oligopoly
answer
oligopoly whereby a firm produces a differentiated product
question
strategic behavior
answer
self interested economic actions that take into account the expected reactions of others
question
mutual interdependence
answer
a situation in which a change in price strategy by one firm will affect the sales and profits of another firm; any firm that makes such a change can expect its rivals to react to the change
question
interindustry competition
answer
the competition for sales between the products of one industry and the products of another industry
question
import competition
answer
competition that domestic firm encounter from the products and services from foreign producers
question
game theory
answer
the study of how people behave in strategic situations in which individuals must take into account not only their own possible actions but also the possible reactions of others
question
collusion
answer
a situation in which firms act together and in agreement to fix prices, divide a market, or otherwise restrict competition
question
kinked demand curve
answer
a demand curve that has a flatter slope above the current price than below the current price'; applies to a noncollusive oligopoly firm if its rivals will match any price decrease but ignore any price increase
question
price war
answer
successive, competitive, and continued decreases in the prices charged by firms in an oligopolistic industry; at each stage of the price war, one firm lowers its price below its rivals price, hoping to increase sales and revenues at its rivals' expense
question
cartel
answer
formal agreement among firms in an industry to set the price of a product and establish the outputs of the individual firms or to divide the market for the product geographically
question
price leadership
answer
an informal method that firms in an oligopoly may employ to set the price of their product: one firm is the first to announce a change in price and the other firms soon announce identical or similar changes
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