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Micro Economics week 14 notes

by: Isabelle Hue

Micro Economics week 14 notes ECON 1001

Marketplace > University of Cincinnati > Business > ECON 1001 > Micro Economics week 14 notes
Isabelle Hue
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chapter 13 notes
Sourushe Zandvakili
Class Notes
monopolistic competition, econ101, Microecon, Economics, oligopoly, week 14, Chapter 13
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This 2 page Class Notes was uploaded by Isabelle Hue on Tuesday April 12, 2016. The Class Notes belongs to ECON 1001 at University of Cincinnati taught by Sourushe Zandvakili in Summer 2015. Since its upload, it has received 21 views. For similar materials see Microeconomics in Business at University of Cincinnati.


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Date Created: 04/12/16
monopolistic competition -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 product differentiation- A strategy in which one firm's product is distinguished from competing products by means of its d esign, related services, quality, location, or other attributes (except price). nonprice competition-  Competition based on distinguishing one's product by means of product differentiation and then advertising the distinguished product to consumers. four-firm concentration ratio- The percentage of total industry sales accounted for by the top four firms in an industry. herfindahl index- A measure of the concentration and competitiveness of an industry; calculated as the sum of the squared percentage market shares of the indi vidual firms in the industry. excess capacity-Plan resources that are underused when imperfectly competitive firms produce less output than that associated with achieving minimum average total cost. oligopoly -A <i>market structure</i> in which a few <i>firms</ i> sell either a <i>standardized</i> or <i>differentiated product,</ i> into which entry is difficult, in which the firm has limited control over pro duct <i>price</i> because of <i>mutual interdependence</ i> (except when there is collusion among firms), and in which there is typic ally <i>nonprice competition</i>. homogeneous oligopoly- An <i>oligopoly</i> in which <i>firms</ i> produce a <i>standardized product</i>. differentiated oligopoly -An <i>oligopoly</i> in which <i>firms</ i> produce a <i>differentiated product</i>. strategic behavior-Self- interested economic actions that take into account the expected reactions  of others. mutual interdependence-A situation in which a change in <i>price</ i> strategy (or in some other strategy) by one <i>firm</ i> will affect the sales and profits of another firm (or other firms). Any firm t hat makes such a change can expect its rivals to react to the change. interindustry competition-  The competition for sales between the products of one <i>industry</ i> and the products of another industry. import competition-The competition that domestic <i>firms</ i> encounter from the products and <i>services</i> of foreign producers. game theory- 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 po ssible reactions of others. Originally developed to analyze the best ways to  play games like poker and chess. collusion-A situation in which <i>firms</ i> act together and in agreement (collude) to fix <i>prices,</ i> divide a market, or otherwise restrict competition. kinked-demand curve- A <i>demand curve</ i> that has a flatter slope above the current <i>price</ i> than below the current price. Applies to a <i>noncollusive oligopoly</ i> firm if its rivals will match any price decrease but ignore any price increa se. price war- Successive, competitive, and continued decreases in the <i>prices</ i> charged by <i>firms</i> in an oligopolistic <i>industry</ i>. At each stage of the price war, one <i>firm</ i> lowers its price below its rivals' price, hoping to increase its sales and re venues at its rivals' expense. The war ends when the price decreases ceas e. cartel-A formal agreement among <i>firms</ i> (or countries) in an <i>industry</i> to set the <i>price</ i> of a product and establish the outputs of the individual firms (or countrie s) or to divide the market for the product geographically. price leadership-An informal method that <i>firms</ i> in an <i>oligopoly</i> may employ to set the <i>price</ i> of their product: One firm (the leader) is the first to announce a change i n price, and the other firms (the followers) soon announce identical or simil ar changes.


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