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Econ definitions

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edwinesosa's version from 2015-06-07 09:50

Section

Question Answer
profit maxmc =mr
revenue maxmr=0
sales maxac=ar
profit satisficingmaking sufficient profit to satisfy the demand of shareholders
cartelwhere firms collude to act as a single firm in decidion making
short run shut down pointif firms are not making a able to cover AVC they shut down short run as they are not making a contribution to fixed costs
horizontal intergarationtaking over a firm in the same stage of production in the same industry
vertical forwards intergrationtaking over a firm in a later stage of their chain of production in the same industry
vertical backwards intergrationtaking over a firm in a previous stage in their chain of production in the same industry
conglomerate integrationtaking over a firm in a different industry
EOSfactors which cause long run average costs to fall as output rises
DEOSfactors which cause long run costs to rise as output increases
external EOSfactors affecting the industry that cause LRAC to fall as output increases
productive efficiencyfirm is producing at minimum costs
allocative efficiencypricing at P=MC
x inefficiencywhere dominant firms become less efficient due to a lack of incentives to cut costs due to low competition and so prices rise
barrier to entryfactors that prevent a firm entering an industry and competing
sunk costscosts that are not recoverable once a firm leaves an industry
market concentrationthe extent to which a particular market is dominated by a few firms
perfect competitionmarket structure wiith large number of price taking firms producing homogenous products and low barriers to entry
price discriminationfirms having 2 different prices for 2 different markets for the same good or service
monopsony powerwhere a firm is one of only a few buyers
monopolistic competitionlarge number of price making firms, low barriers to entry, differentiated products
oligopolya few dominant firms in a market
collusioncollective agreement s between firms not to compete with each other in an attempt to increase industry profits high and restrict competition
tacit collusioninformal collective agreements between firms not to compete with each other in an attempt to increase industry profits high and restrict competition,
overt collusionspoken open or traceable agreements between firms not to compete with each other in an attempt to increase industry profits high and restrict competition, involving cooperation
limit pricingpricing below entrant firms AC to deter entry
predatory pricinglosses made in the short run by pricing below AVC to force rivals out the market or deter entry
price leadershipa form of tacit collusion where a firm raises prices in the hope that others will follow
first mover advantageform of competitive advantage that a company gains by being the first to enter a specific market/industry
contestable marketa market with low barriers to entry and sunk costs
competition commisionthey act to protect public interest and promote competition
price cappinga regulator sets a limit on price increases for a set period of time
PPIWhere the private sector builds and maintains infrastructure and leases it to the government
PPPwhere the private sector and public sector collaborate to deliver goods and services
competitive tenderingintroducing competition amongst private sector firms which put in bids for work which is contracted out by the public sector
contracting outgetting private sector firms to produce goods/services which are then provided by the state for its citizens
patentlegal protection right...
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