| consumer surplus | the difference between what the consumer is willing to pay for a product and what the consumer actually pays when buying it |
| learning curves | displays the relation between average cost for a given output and cumulative past production |
| monopolistic competition | a market structure that is hybrid between competition and monopoly. there are multiple firms that product similar products |
| network effects | demand for a product increases even more because more people are using the product |
| adverse selection | the tendency of individuals, with private information about something that affects a potential trading partner's cost or benefits, to make offers that are detrimental to the trading partner. e.g. quality uncertainty (health insurance, market for lemons (second hand cars), bank credit rationing) |
| oligopolistic market | a market structure where the market is dominated by a few large firms which account for most of the products within the market. products may of may not be differentiated. firms CAN EARN ECONOMIC PROFITS |
| price discrimination | price discrimination is when a firm charges customers (or different sub groups) different prices for the same product of service. |
| sunk costs | sunk costs are non recoverable costs that already have been incurred and the resources have no alternative use |
| marginal revenue | marginal revenue is the change in revenue by the one-unit change in quantity |
| law of demand | law of demand states that normal demand curves slope downwards to the right. the higher the price, the lower the demand. why? consumer's opportunity costs increases of that product/service, so more trade offs need to be made. |
| inferior good | a good for which the quantity purchased declines when income increases. |
| economic profit | an above competitive (or extra normal) rate of return on assets |
| cartel | consists of formal agreements among a set of firms to cooperate in setting prices and output levels |
| monitoring costs | the costs to oversee whether the obligations of another party have been met |
| marginal costs | the change in total costs associated with one-unit change in output |
| marginal utility | increase or decrease in utility when one additional product is gained |
| externalities | effects or actions outside an exchange relationship |
| price discrimination | charge different prices (to different subgroups or customers) for the same product, not related to differences in production of distribution costs |
| free rider problem | occurs in team efforts. a person who obtains something without effort or cost. |
| law of diminishing returns | states the marginal product of a variable factor will eventually decline as the use of the factor is increased. |
| indifference curve | Graphical tool to show the combination of two particular goods which yield one level utility |
