What's it: Collusion is tacit cooperation or agreement to deceive others and achieve mutual benefits for the parties involved. Such agreements exist to avoid direct competition, reduce market uncertainty, and achieve higher profits. Collusion is
Microeconomics
Economies of Scale: Types, Benefits, How to Achieve It
What it is: Economies of scale are the cost savings when a company increases its production scale. An increase in output allows the firm to reap a decreasing average cost of production. Production becomes more efficient because the firm can
Monopoly Power: Meaning, Sources, and Effects
What's it: Monopoly power refers to a firm's ability to influence market prices. It is weak when the market is made up of many players, and products are relatively homogeneous. Market power is higher when firms operate under an oligopoly, where the
Market Failure: Types, Effects, and Solutions
What's it: Market failure refers to a condition in which the market mechanism doesn't work, thus creating inefficiency in the market. Demand, supply, and price aren't in equilibrium. As a result, markets fail to allocate economic resources most
Externalities: Meaning, Types, and Solutions
What's it: Externalities are costs or benefits of economic activities borne by third parties who are not involved in it. They are not reflected in the final cost or benefit of the goods or services produced. Economists view externalities as
Cartel: Goals, Examples, Characteristics, Effects, and Reasons for Failure
What's it: A cartel is a formal agreement between several parties to increase economic benefits. It can appear on both the market demand and supply sides, although the latter is more common. Cartel objectives A cartel is a form of
Cournot Model: Concept, Assumption, Solution, and Criticism
What's it: A Cournot model is one of the economic models to explain the oligopoly market. This model assumes that the firm independently decides the profit-maximizing level of production. I mean, they don't depend on how many competitors are
Economies of Scope: Meaning, Formula, and How to Calculate
What's it: Economies of scope is a reduction in the unit cost of production when companies produce two or more products using the same production facilities or resources. The example is more or less like this. Automakers use one production
Perfect Competition: Characteristics, and Implications
What's it: Perfect competition is a theoretical market structure concept with many companies producing identical goods or services. In other words, each company offers goods that substitute each other entirely. The perfect competition enables