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Principles of Economics 3e

Key Terms

Principles of Economics 3eKey Terms
cartel
a group of firms that collude to produce the monopoly output and sell at the monopoly price
collusion
when firms act together to reduce output and keep prices high
differentiated product
a product that consumers perceive as distinctive in some way
duopoly
an oligopoly with only two firms
game theory
a branch of mathematics that economists use to analyze situations in which players must make decisions and then receive payoffs based on what decisions the other players make
imperfectly competitive
firms and organizations that fall between the extremes of monopoly and perfect competition
kinked demand curve
a perceived demand curve that arises when competing oligopoly firms commit to match price cuts, but not price increases
monopolistic competition
many firms competing to sell similar but differentiated products
oligopoly
when a few large firms have all or most of the sales in an industry
prisoner’s dilemma
a game in which the gains from cooperation are larger than the rewards from pursuing self-interest
product differentiation
any action that firms do to make consumers think their products are different from their competitors'
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