The principal-agent problem occurs when one person or group, called the agent, makes decisions for another person or
Glossary Category: Market Structures
consequences of a cartel
A cartel is an agreement between competing firms to fix prices or limit production. These agreements create significant
conditions for an effective cartel
Conditions for an effective cartel are the market and organizational factors that allow a group of firms to
cartels
A cartel is a formal agreement between competing companies to work together. Instead of competing, they coordinate their
reasons for different sizes of firms
The size of a firm is determined by why some industries contain many small businesses, while others are
derivation of firm supply curve
The derivation of a firm’s supply curve explains how much a firm chooses to produce as the market
collusion
Collusion happens when businesses in an oligopoly (a market dominated by a few large firms) secretly work together.
non-price competition
Non-price competition occurs when businesses compete by using factors other than lowering prices. Instead of focusing on cost,
price competition
Price competition occurs when businesses try to win customers and increase their market share by offering lower prices
X-inefficiency
X-inefficiency happens when a company fails to operate at its maximum potential. Instead of producing the most output