4/12/2016

Glossary|Coursera

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Glossary
Here you will find the description of some words and phrases that pertain to the concepts in
this course, and also words and phrases used in the videos and readings. If you want to add
another word or expression that we missed, please suggest it in the forums.

A
adverse selection. Adverse selection occurs when incomplete or asymmetric information
describes an economic relationship.
asymmetric information. Asymmetric information is where at least one party in an economic
relationship has less than full information and has a different amount of information from
another party.

B
C
collusion. Collusion is an explicit or implicit agreement to avoid competition with a view to
increasing profit.
conjecture. Conjecture is a belief that one firm forms about the strategic reaction of another
competing firm.
consumer surplus. Consumer surplus is the excess of consumer willingness to pay over the
market price.

D
deadweight loss. Deadweight loss of a tax is the component of consumer and producer
surpluses forming a net loss to the whole economy.
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differentiated product. Differentiated product is one that differs slightly from other products
in the same market.
dominant strategy. Dominant strategy is a players best strategy, whatever the strategies
adopted by rivals.

E
externality. It is a benefit or cost falling on people other than those involved in the activitys
market. It can create a difference between private costs or values and social costs or values.

F
G
game. A situation in which contestants plan strategically to maximize their profits, taking
account of rivals behavior.

H
I
industry supply (short run). Industry supply (short run) in perfect competition is the
horizontal sum of all firms supply curves.

J
K
L
long-run equilibrium. In a competitive industry, it requires a price equal to the minimum
point of a firms ATC. At this point, only normal profits exist, and there is no incentive for firms
to enter or exit.

M
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marginal social cost curve. A marginal social cost curve reflects the cost to society of an
additional unit of pollution.
market failure. Market failure defines outcomes in which the allocation of resources is not
efficient.
moral hazard. Moral hazard may characterize behavior where the costs of certain activities
are not incurred by those undertaking them.

N
Nash equilibrium. One in which each player chooses the best strategy, given the strategies
chosen by the other player, and there is no incentive for any player to move.
natural monopoly. One where the ATC of producing any output declines with the scale of
operation.

O
oligopoly. Oligopoly defines an industry with a small number of suppliers.

P
patent laws. Patent laws grant inventors a legal monopoly on use for a fixed period of time.
payoff matrix. It defines the rewards to each player resulting from particular choices.
perfect competition. An industry in which many suppliers, producing an identical product,
face many buyers, and no one participant can influence the market.
price discrimination. Involves charging different prices to different consumers in order to
increase profit.

Q
quotas. Quotas are restrictions on output or sales.

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risk. The risk associated with an investment can be measured by the dispersion in possible
outcomes. A greater dispersion in outcomes implies more risk.

S
strategy. A game plan describing how a player acts, or moves, in each possible situation.
supplier (producer) surplus. The excess of market price over the reservation price of the
supplier.

T
U
V
W
X
Y
Z

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