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\mymulticolumn{2}{x{17.67cm}}{{\bf{Definitions}}} \tn 
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price discrimination & the practice of selling the same good or service at different prices to different groups of customers \tn 
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perfect price discrimination & the practice of selling the same good or service at a unique price to every customer (set at their max willingness to pay) \tn 
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First Degree Price Discrimination & perfect price discrimination where the firm will charge a person based on their exact willingness to pay \tn 
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Second Degree Price Discrimination & Firms will offer discounts based on bulk purchasing \tn 
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Third Degree Price Discrimination & Firms will charge different prices based on differences in price elasticity of demand (ex. movie theatre concessions or student discounts) \tn 
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Conditions for Price Discrimination & distinguishing groups of buyers with different price elasticities of demand, preventing resale, \tn 
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Monopolistic Competition & a type of market structure characterized by low barriers to entry, many different firms, and product differentiation \tn 
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Product Differentiation & the process firms use to make a product more attractive to potential customers \tn 
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Markup & the difference between the price the firm charges and the marginal cost of production \tn 
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Excess Capacity & phenomenon occurring when a firm produces at an output level smaller than the output level needed to minimize average total costs \tn 
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\mymulticolumn{2}{x{17.67cm}}{in monopolistically competitive industries...} \tn 
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\mymulticolumn{2}{x{17.67cm}}{- economic profits are zero and are the same as perfectly competitive markets} \tn 
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\mymulticolumn{2}{x{17.67cm}}{- MR \textless{} Price} \tn 
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\mymulticolumn{2}{x{17.67cm}}{- price is more likely to be higher than perfectly competitive industries because of the cost of variety} \tn 
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\mymulticolumn{2}{x{17.67cm}}{\bf\textcolor{white}{Monopolistic Competition and Advertising (cont)}}  \tn
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\mymulticolumn{2}{x{17.67cm}}{- it is inefficient because price does not equal minimum ATC} \tn 
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\mymulticolumn{2}{x{17.67cm}}{- long run equilibrium, Price = ATC, Price \textgreater{} MC} \tn 
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Monopolistic competition characteristics & low barriers to entry, many different firms, and product differentiation \tn 
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production differentiation in... & style or type, location, and quality \tn 
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Oligopoly & a form of market structure that exists when a small number of firms sell a differentiated product in a market with high barriers to entry \tn 
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Collusion & an agreement among rival firms that specifies the price each firm charges and the quantity it produces \tn 
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Cartel & a group of two or more firms that act in unison \tn 
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Antitrust Laws & laws that attempt to prevent collusion (that is, prevent oligopolies from behaving like monopolies) \tn 
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Mutual Independence & a market situation where the actions of one firm have an impact on the price and output of its competitors \tn 
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Price Leadership & phenomenon occurring when a dominant firm in an industry sets the price that maximizes its profits and the smaller firms in the industry follow by setting their prices to match the price leader \tn 
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\mymulticolumn{2}{x{17.67cm}}{\bf\textcolor{white}{Oligopoly and Strategic Behavior (cont)}}  \tn
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Price Effect & how a change in price affects the firm's revenue \tn 
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Output Effect & how a change in price affects the number of customers in a market \tn 
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Game Theory & a branch of mathematics that economists use to analyze the strategic behavior of decision-makers \tn 
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Prisoner's Dilemma & a situation in which decision-makers face incentives that make it difficult to achieve mutually beneficial outcomes, when the socially optimal strategy doesn't equal the dominant strategy \tn 
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Dominant Strategy & in game theory, a strategy that a player will always prefer, regardless of what his opponent chooses \tn 
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Nash Equilibrium & a phenomenon occurring when all economic decision-makers opt to keep the status quo (neither player has na incentive to switch their strategy given what the other player is doing) \tn 
% Row Count 35 (+ 9)
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\mymulticolumn{2}{x{17.67cm}}{\bf\textcolor{white}{Oligopoly and Strategic Behavior (cont)}}  \tn
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Tit-for-Tat & a long-run strategy that promotes cooperation among participants by mimicking the opponent's most recent decision with repayment in kind \tn 
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Backward Induction & in game theory, the process of deducing backward from the end of a scenario to infer a sequence of optimal actions \tn 
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Decision Tree & diagram that illustrates all of the possible outcomes in a sequential game \tn 
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Sherman Antitrust Act & the first federal law (1890) limiting cartels and monopolies \tn 
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Clayton Act & law of 1914 targeting corporate behaviors that reduce competition \tn 
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Predatory Pricing & the practice of a firm deliberately setting its prices below average variable costs with the intent of driving rivals out of the market \tn 
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\mymulticolumn{2}{x{17.67cm}}{\bf\textcolor{white}{Oligopoly and Strategic Behavior (cont)}}  \tn
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Network Externality & condition occurring when the number of customers who purchase or use a product influences the quantity demanded \tn 
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Switching Costs & the costs incurred when a consumer changes from one supplier to another \tn 
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Prisoner's dilemma dominant strategy & rat out your partner to avoid jail time \tn 
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\mymulticolumn{2}{x{17.67cm}}{{\bf{Definitions}}} \tn 
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Utility & a measure of the level of satisfaction that a consumer enjoys from the consumption of goods and services \tn 
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Util & a personal unit of satisfaction used to measure the enjoyment from consumption of a good or service \tn 
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Marginal Utility & the additional satisfaction derived from consuming one more unit of a good or service \tn 
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Diminishing Marginal Utility & condition occurring when marginal utility declines as consumption increases \tn 
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Consumer Optimum & the combination of goods and services that maximizes the consumer's utility for a given income or budget (MU/P is equal across products) \tn 
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Substitution Effect & (1) the decision by laborers to work more hours at higher wages, substituting labor for leisure; (2) a consumer's substitution of a product that has become relatively less expensive as the result of a price change \tn 
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\mymulticolumn{2}{x{17.67cm}}{\bf\textcolor{white}{Consumer Decision Making (cont)}}  \tn
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Real-income effect & a change in purchasing power as a result of a change in the price of a good \tn 
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Diamond-water paradox & concept explaining why water, which is essential to life, is inexpensive, while diamonds, which do not sustain life, are expensive \tn 
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Indifference Curve & a graph representing the various combinations of two goods that yield the same level of personal satisfaction, or utility \tn 
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Maximization point & the point at which a certain combination of two goods yields the greatest possible utility \tn 
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Budget constraint & the set of consumption bundles that represent the maximum amount the consumer can afford \tn 
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Marginal rate of substitution (MRS) & the rate at which a consumer is willing to trade one good for another along an indifference curve \tn 
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\mymulticolumn{2}{x{17.67cm}}{\bf\textcolor{white}{Consumer Decision Making (cont)}}  \tn
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Perfect substitutes & two goods the consumer is completely indifferent between, resulting in a straight-line indifference curve with a constant marginal rate of substitution \tn 
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Perfect complements & two goods the consumer is interested in consuming in fixed proportions, resulting in a right-angle indifference curve \tn 
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\mymulticolumn{2}{x{17.67cm}}{{\bf{Relationships}}} \tn 
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if combination of something one loves and something one hates & maximum utility is gained from purchasing maximum quantity of the thing one loves \tn 
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Behavioral Economics & the field of economics that draws on insights from experimental psychology to explore how people make economic decisions \tn 
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Bounded Rationality & the concept that although decision-makers want a good outcome, either they are not capable of performing the problem solving that traditional economic theory assumes or they are not inclined to do so; also called limited reasoning \tn 
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Gambler's Fallacy & the belief that recent outcomes are unlikely to be repeated and that outcomes that have not occurred recently are due to happen soon \tn 
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Hot Hand Fallacy & the belief that random sequences exhibit a positive correlation \tn 
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Framing Effect & a phenomenon seen when people change their answer depending on how the question is asked (or change their decision depending on how alternatives are presented) \tn 
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\mymulticolumn{2}{x{17.67cm}}{\bf\textcolor{white}{Behavioral Economics and Risk Taking (cont)}}  \tn
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Priming Effect & phenomenon seen when the order of the questions influences the answers \tn 
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Status Quo Bias & condition existing when decision-makers want to keep things the way they are \tn 
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Intertemporal Decision-Making & planning to do something over a period of time, which requires valuing the present and the future consistently \tn 
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Ultimatum Game & an economic experiment in which two players decide how to divide a sum of money \tn 
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Risk-Averse People & those who prefer a sure thing over a gamble with a higher expected value \tn 
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Risk-Neutral People & those who choose the highest expected value regardless of the risk \tn 
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Risk-Takers & those who prefer gambles with lower expected values, and potentially higher winnings, over a sure thing \tn 
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Preference Reversal & phenomenon arising when risk tolerance is not consistent \tn 
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Prospect Theory & a theory suggesting that individuals weigh the utilities and risks of gains and losses differently \tn 
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