Term
| When do we have a natural monopoly? |
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Definition
| When the LAC curve is declining throughout. This makes it cheapest for a single firm to serve the entire industry. |
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Term
| optimality condition for a monopolist |
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Definition
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Term
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Definition
| the purchase of something for costless risk-free resale at a higher price. |
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Term
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Definition
| a condition in which a firm fails to obtain maximum output from a given combination of inputs. |
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Term
| Pivotal difference between monopolists and perfect competitors: |
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Definition
MR < P for monopolists.
MR = P for perfect competitor. |
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Term
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Definition
| the strategy in a game that produces better results irrespective of the strategy chosen by one's opponent. |
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Term
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Definition
| One or both players has a dominant strategy. If it's one, the other will choose accordingly, if its both, each will choose their dominant. |
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Term
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Definition
| Pick whichever option has the highest minimum payoff. |
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Term
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Definition
| Each firm assumes that its rivals will continue producing at current levels. P = (a-bQ2)-bQ1, MR = (a-bQ2)-2bQ1. So profit maximizing Q1 = [(a-bQ2)-MC]/2b |
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Term
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Definition
| a curve that tells the profit-maximizing level of output for one oligopolist for each amount supplied by another. |
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Term
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Definition
One firm knows the other is a Cournot duopolist.
P = (a-b[Q2 reaction function]) - bQ1
Simplify, then get MR by doubling slope.
Set MR = MC and get Q1
Plug Q1 into Q2 reaction function to get |
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Term
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Definition
| I assume that my opponent will maintain his price. Price is set equal to MC so there are zero profits. Both produce the same amount and sell it for the same price. The same as perfect competition. |
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Term
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Definition
| Treat it like its a one firm monopoly but then split up output evenly among however many firms there are. |
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Term
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Definition
DD - what happens when all firms change price together.
dd - the demand curve that a firm will face if it alone changes price. |
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Term
| Value of marginal product |
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Definition
the value, at current market price, of the extra output produced by an additional unit of input.
VMP = MR*MPL |
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Term
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Definition
| the amount by which total revenue increases with the employment of an additional unit of input. |
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Term
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Definition
| another name for the supply curve for an input |
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Term
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Definition
| the product of the employment level of an input and its average factor cost. |
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Term
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Definition
| the amount by which total factor cost changes with the employment of an additional unit of input. |
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