monopolistic competition
Market structure of an industry in which there are many firms and
freedom of entry and exit but in which each firm has a product somewhat
differentiated from the others, giving it some control over its price.
excess-capacity theorem
The property of long-run equilibrium in monopolistic competition that
firms produce on the falling portion of their long-run average cost curves.
This results in excess capacity, measured by the gap between present
output and the output that coincides with minimum average cost.
oligopoly
An industry that contains two or more firms, at least one of which
produces a significant portion of the industry’s total output.
strategic behaviour
Behaviour designed to take account of the reactions of one’s rivals to
one’s own behaviour.
cooperative (collusive) outcome
A situation in which existing firms cooperate to maximize their joint
profits.
non-cooperative outcome
An industry outcome reached when firms maximize their own profit
without cooperating with other firms.