M
when it is costly or impossible to exclude someone from using the good, and thus hard to charge for it
nonexcludable
even when one person uses the good, others can also use it
nonrivalrous
when the estimated rates of return go primarily to an individual; for example, earning interest on a savings account
private rates of return
good that is nonexcludable and nonrivalrous, and thus is difficult for market producers to sell to individual consumers
public good
the dollar value of all benefits of a new product or process invented by a company that can be captured by other firms and by society as a whole
social benefits
when the estimated rates of return go primarily to society; for example, providing free education
social rate of return
a group of firms that collude to produce the monopoly output and sell at the monopoly price
cartel
a branch of mathematics often used by economists that analyzes situations in which players must make decisions and then receive payoffs based on what decisions the other players make
game theory
when one firm purchases another
acquisition
a situation in which multiple products are sold as one
bundling
when regulators permit a regulated firm to cover its costs and to make a normal level of profit
cost plus regulation
an agreement that requires a dealer who buys from a manufacturer to sell for at least a certain minimum price
minimum resale price maintenance agreement
when the regulator sets a price that a firm cannot exceed over the next few years
price cap regulation
when the firms supposedly being regulated end up playing a large role in setting the regulations that they will follow and as a result, they "capture" the people doing the regulation, usually through the promise of a job in that "regulated" industry once their term in government has ended.
regulatory capture
a situation where a customer is allowed to buy one product only if the customer also buys another product
tying sales
additional costs incurred by third parties outside the production process when a unit of output is produced
additional external costs
a permit that allows a firm to emit a certain amount of pollution; firms with more permits than pollution can sell the remaining permits to other firms
marketable permit program
a situation where a third party, outside the transaction, suffers from a market transaction by others
negative externality
the legal rights of ownership on which others are not allowed to infringe without paying compensation
property rights
costs that include both the private costs incurred by firms and also additional costs incurred by third parties outside the production process, like costs of pollution
social costs
beneficial spillovers to a third party or parties
positive externalities
the dollar value of all benefits of a new product or process invented by a company that can be captured by the investing company
private benefits
approach to measuring market concentration by adding the square of the market share of each firm in the industry
Herfindahl-Hirschman Index (HHI)
practices that reduce competition but that do not involve outright agreements between firms to raise prices or to reduce the quantity produced
restrictive practices
a market exchange that affects a third party who is outside to the exchange
externality