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