Excess Capacity: The gap between the minimum ATC output & the profit maximizing output.
Cartel Model: a combination of firms that acts as if it were a single firm; shared monopoly;
Normal profit: the amount the owners of business would have received in the next-best alternative
Monopoly: a market structure in which one firm makes up the entire market
Oligopoly: a market structure in which there are only a few firms and firms explicitly take other firms' likely response into account
Natural monopoly: an industry in which a single firm can produce at a lower cost than can two or more firms
Dominant strategy: a strategy that is preferred by a player regardless of the opponent's move
Game theory: formal economic reasoning applied to situations in which decisions are interdependent
Nash Equilibrium: a set of strategies for each player in the game in which no player can improve his or her payoff by changing strategy unilaterally
Barriers to Entry: anything that makes it difficult for a new firm to be formed in a market. Common ones include the government, startup cost, and economies of scale
Dead Weight Loss: the loss of consumer and producer surplus from a tax; measures the inefficiency caused from a market distortion, such as a tax levied on an item or a minimum price law
Product Differentiation: the goods that are sold aren't homogeneous, as in perfect competition; they are differentiated slightly
Kinked Demand Curve: theory about oligopoly and monopolistic competition, it was an initial attempt to explain sticky prices
Fair return price: a rational and unbiased estimate of the market price of something, using such factors as cost, supply and demand and risk characteristics
Socially optimal price: the price where firm does not retain any profits and all the benefits are passed onto society