econ notes - Product Differentiation Product...

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Product Differentiation Product differentiation is an attempt by a firm to convince buyers that its product is different from the products of other firms in the industry. Collusion In oligopoly, collusion refers to a few large firms reaching or holding to an agreement that maximizes joint profits. Collusion in a market or industry is easier to achieve when: 1. There are only a small number of firms in the industry and barriers to entry protect the monopoly power of existing firms in the long run; 2. Market demand is not too variable; 3. Demand is fairly inelastic with respect to price so that a higher cartel price increases the total revenue to suppliers in the market; 4. Each firm’s output can be easily monitored – this enables the cartel more easily to control total supply and identify firms who are cheating on output quotas. PPC The production possibility frontier or curve (PPF or PPC) shows the maximum output that can be produced in an economy at any given moment, given the resources available.
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This note was uploaded on 01/25/2012 for the course AS 195.603 taught by Professor C.b. during the Fall '11 term at Johns Hopkins.

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econ notes - Product Differentiation Product...

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