May 30, 2023 

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LRMC CURVE: The common abbreviation for the long-run marginal cost curve, which is the graphical representation of the relationship between long-run marginal cost and the quantity of output produced. Like other marginal curves, the long-run marginal cost curve follows the average-marginal rule relative to the long-run average cost curve. In all outward appearance, the long-run marginal cost curve looks very much like the short-run marginal cost, that is, it is U-shaped. However, the U-shape is attributable to returns to scale rather than increasing and decreasing marginal returns.

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Lesson 20: Oligopoly | Unit 4: Analysis Page: 19 of 24

Topic: Game Theory <=PAGE BACK | PAGE NEXT=>

  • A handy way to analyze this type of market interdependence is through game theory.

  • Game theory is an analysis that illustrates how the choices between two players affect the outcomes of a "game."
  • Assume the market has only two firms, OmniCola and Juice-Up.

  • Each is thinking about spending $50 million on advertising.

  • This table presents alternative outcomes for different advertising choices by OmniCola and Juice-Up:

    1. If OmniCola and Juice-Up BOTH decide to advertising, then each receives $200 million in profit.

    2. However, if NEITHER OmniCola or Juice-Up decide to advertising, then each receives $250 million in profit.

    3. Alternatively, if OmniCola advertises but Juice-Up does not, then OmniCola receives $350 million in profit and Juice-Up receives only $100 in profit.

    4. But, if Juice-Up advertises and OmniCola does not, then Juice-Up receives $350 million in profit and OmniCola receives only $100 in profit.

  • What to do?

  • The end result is that both firms decide to advertise.

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Spending by the government sector including both the purchase of final goods and services, or gross domestic product, and transfer payments. Government expenditures are used by the government sector to undertake key functions, such as national defense and education. These expenditures are financed with a combination of taxes and borrowing.

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Today, you are likely to spend a great deal of time looking for a downtown retail store wanting to buy either decorative picture frames or storage boxes for your income tax returns. Be on the lookout for celebrities who speak directly to you through your television.
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Three-forths of the gold mined each year is used to manufacture jewelry.
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