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RISK NEUTRAL: A person who values a certain income the same as an equal amount of income that involves risk or uncertainty. Let's say that you're given two options--(A) a guaranteed $1,000 or (b) a 50-50 chance of getting either $500 or $1,500. If you don't really care which option you chose, because both options have the same "expected" values, then you're risk neutral.

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Lesson 20: Oligopoly | Unit 4: Analysis Page: 18 of 24

Topic: Collusion Output <=PAGE BACK | PAGE NEXT=>

  • By combining their productive capabilities -- that is, their marginal cost curves -- the firms can now reach a profit-maximizing output.

  • This is the same output level that would be reach if monopoly controlled the soft-drink market.

  • The two firms maximize total industry profit by producing the quantity of output in which the marginal cost of each firm is equal to the marginal revenue for the overall market.

  • A Little Cheating: Consider either firm's predicament. Both can increase profit by increasing production.

  • However, under the collusion agreement, each firm can do a little better if they increase production -- so long as the other firms maintain the agreement and the higher price.

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IMPACT LAG

The time lag that occurs between the implementation of a government policy designed to correct an economic problem and the complete impact of the policy. The impact lag is based on the multiplier process and can last up to a year or two or even longer. This "outside lag" is one of four policy lags associated with monetary and fiscal policy. The other three "inside lags" are recognition lag, decision lag, and implementation lag. All four policy lags can reduce the effectiveness of business-cycle stabilization policies and can even destabilize the economy.

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BROWN PRAGMATOX
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Today, you are likely to spend a great deal of time looking for a downtown retail store trying to buy either a wall poster commemorating the first day of winter or blue cotton balls. Be on the lookout for celebrities who speak directly to you through your television.
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The 22.6% decline in stock prices on October 19, 1987 was larger than the infamous 12.8% decline on October 29, 1929.
"One person with a belief is equal to a force of ninety-nine with only interests."

-- John Stuart Mill

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Tokyo International Financial Futures Exchange (Japan)
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