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AGGREGATE MARKET EQUILIBRIUM: The state of equilibrium that exists in the aggregate market when real aggregate expenditures are equal to real production with no imbalances to induce changes in the price level or real production. In other words, the opposing forces of aggregate demand (the buyers) and aggregate supply (the sellers) exactly offset each other. The four macroeconomic sector (household, business, government, and foreign) buyers purchase all of the real production that they seek at the existing price level and business-sector producers sell all of the real production that they have at the existing price level. The aggregate market equilibrium actually comes in two forms: (1) long-run equilibrium, in which all three aggregated markets (product, financial, and resource) are in equilibrium and (2) short-run equilibrium, in which the product and financial markets are in equilibrium, but the resource markets are not.

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Lesson 20: Oligopoly | Unit 2: Structure Page: 7 of 24

Topic: Concentration Ratios <=PAGE BACK | PAGE NEXT=>

  • The most popular measure (or measures) of concentration has (have) been the concentration ratio.

  • A quick definition:

  • A concentration ratio is the proportion of total output in an industry that's produced by a given number of the largest firms in the industry.
  • The two most common concentration ratios are the 4-firm concentration ratio and 8-firm concentration ratio.

  • In general concentration ratios range for a low of 0% to a high of 100%.

  • A ratio of 0% indicates perfect competition and 100% ratio indicates total market control by the given number of firms use for the calculation


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ADVERSE SELECTION

An inefficient, bad, or adverse outcome of a market exchange that results because buyers and/or sellers make decisions based on asymmetric information. This commonly results in a market that exchanges a lesser quality good, what is termed the market for lemons. Two related problems resulting from asymmetric information are moral hazard and the principal-agent problem. Two methods of lessoning the problem of adverse selection are signalling and screening.

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Today, you are likely to spend a great deal of time strolling through a department store wanting to buy either a bottle of blackcherry flavored spring water or a travel case for you toothbrush. Be on the lookout for small children selling products door-to-door.
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The first paper currency used in North America was pasteboard playing cards "temporarily" authorized as money by the colonial governor of French Canada, awaiting "real money" from France.
"Carpe diem! Rejoice while you are alive; enjoy the day; live life to the fullest; make the most of what you have. It is later than you think."

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