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  1. How to find profit using PMP and PMQ?
    • 1) find PMP and PMQ ALONG THE DEMAND LINE (where price x quantity is at its best; this is the TOTAL REVENUE)
    • 2) then find where Marginal Revenue and Marginal Cost intersect
    • 3) Find the average cost at the current quantity (along the Average Cost line) and multiply the 2 numbers that meet at that point; this is the TOTAL COST
    • 4) TR - TC = profit
  2. monopoly:
    a market in which a single firm sells a product that does not have any close substitutes
  3. Market Power:
    the ability of a firm to affect the price of its product
  4. barrier to entry:
    something that prevents firms from entering a profitable market
  5. patent:
    the exclusive right to sell a new good for some period of time
  6. network externalities:
    the value of a product to a consumer increases with the number of other consumers who use it
  7. natural monopoly:
    a market in which the economies of scale in productin are so large that only a single large firm can earn a profit
  8. deadweight loss from monopoly:
    a measure of the inefficiency from monopoly; equal to the decrease in the market surplus
  9. rent seeking:
    the process of using public policy to gain economic profit
  10. price discrimination:
    the practice of selling a good at different prices to different consumers
  11. Monopolistic competition:
    a market severd by many firms that sell slightly different products
  12. product differentiation:
    the process used by firms to distinguish their products from the products of competing firms
  13. Oligopoly:
    a market severd by a few firms
  14. Game theory:
    the study of decision making in strategic situations
  15. concentration ratios:
    the percentage of the market output produced by the largest firms.
  16. duopoly:
    a market with two firms
  17. cartel:
    a group of firms that act in unison coodinating their price and quantity decisions
  18. price fixing:
    an arrangement in which firms conspire to fix prices
  19. game tree:
    a graphical representation of the consequences of different actions in a strategic setting
  20. donminant strategy:
    an action that is the best choice for a player no matter what the other player does
  21. duopolists' dilemma:
    a situation where both firms in a market would be better off if both chose the high price, but each chooses the lower price
  22. Nash equilibrium:
    an outcome of a game in which eah player is doingg the best he or she can, given the action of the other players
  23. low-price guarantee
    a promice to match a lower price of a competetor
  24. grim-trigger strategy:
    a stragety where a firm responds to underpricing by choosing a price so low that each firm makes zero economic profit
  25. tit-for-tat strategy:
    a strategy where one firm chooses whatever price the other firm chose in the preceeding period
  26. price leadership:
    a system under which one firm in an oligopoly takes the lead in setting prices
  27. kinked demand curve model:
    a model in which firms in a oligopoly match rpice cuts by other firms, but do not match price hikes
  28. payoff matrix:
    a matrix or table that shows, for each possible outcome of a game, the consequences for each player
  29. limit pricing:
    the strategy of reducing the price to deter entry
  30. limit price:
    the price that just low enough to deter entry
  31. cotestable market:
    a maket with low entry and exit costs
  32. trust:
    an arrangement under which the owners of several companies transfer their decision-making power to a small group of trustees
  33. merger:
    a process in which two or more firms combine their operations
  34. tie-in sale:
    a business practice under which a business requres a consumer of one product to purchase another product
  35. predatory priceing:
    a firm sells a product at a price below its production cost to drive a rival out of business and then increases the price
  36. Does an Oligopoly have barriers to entry?
  37. Cartels conspire to:
    charge monopoly price
  38. Advertiser's dilemma:
    even though both firms would be better off without spending money on ads, they still do it.
  39. How to do a concentration ratio using market powers?
    add the market shares of the top (number) firms asked
  40. Low price guarantees in a duopolies creates:
    an informal cartel where both firms pick the high price.
  41. The Act which made it illegal to engage in practices that resulted in the restraint of trade was the:
    Sherman Act
  42. The government is likely to block a merger if:
    it can be established that the merger would substantially reduce competition.
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