oligopoly

profit formula

(P-ATC) x Q (profit per unit x output); TR-TC

characteristics of an oligopoly market

-extensive entry barriers -standardized or differentiated products -producers who behave strategically when making decisions related to the features, prices, and advertising of their products -producers who are large price-makers -few large producers

characteristics of a monopoly

-firm having significant price control -market w/barriers to entry -single seller -good/service where there are no close substitutes

measures the percentage of sales by the 4 largest firms in a particular industry

4-firm concentration ratio (CR-4)

2 most common numerical indicators of market concentration

CR-4 + HHI

concentration index that measures the sum of the squared percentage of sales from all firms in a particular industry

Herfindahl- hirschman index (HHI)

profit per unit formula

P-ATC (price- average total cost)

the HHI is expressed as a number 0-10000, where 10000 represents:

a pure monopoly

designed to prevent firms from engaging in behaviors that would lessen competition in a market

antitrust laws

a group of competing companies that aim to maximize joint profits by coordinating their policies to fix prices, manipulate output, or restrict competition

cartel

a situation in which individuals, firms, or any group of actors coordinate their actions to receive a desired outcome

collusion

the value of the economic surplus that is forgone when a market is not allowed to adjust to competitive equilibrium

deadweight loss

situation in which a particular strategy yields the highest payoff, regardless of the other player's strategy

dominant strategy

when profit exceeds 0, the firm is generating an:

economic profit

helps us study the strategic behavior of oligopolistic firms

game theory

the percentage of total market sales accruing to one specific firm

market share

an outcome in which, unless the players can collude, neither player has an incentive to change their strategy

nash equilibrium

games can have more than 1 ________

nash equilibrium

if an industry's CR-4 exceeds 40% it's considered an:

oligopoly

in an _________ producers may or may not earn profits

oligopoly

a table showing the potential outcomes arising from the choices made by decision-makers

payoff matrix

a firm should produce a level of output where the marginal revenue equals the marginal cost

profit maximization rule

producers operating in oligopolistic markets can generate normal ____ and even _____ in the short run

profits; losses

one similarity between the numeric measures of the HHI and the CR-4 is:

the higher the number, all else held constant, the more concentrated the industry