cht 9-10 Flashcards
micro
Perfect Competition
thousands of sellers of a good, same good, no say over price ( determined in the market)
Monopoly
only one producer, large market power ( pricing)
Monopolistic competition
many sellers, each produce a differentiated good ( same but their own take) ex; clothes, shoes
oligopy
very few sellers, interdependent( decision made by 1 firm will affect the decisions of the other firms) ex; apple and android, at&t and xfinity
price takers
the firms have to accept whatever price prevails in the market
If MR is greater than Mc you..
keep producing
If MC is greater than MR you…
Cut back
if P is greater than ATC you…
keep producing
if P is less than AVC you..
shut down
If AVC is less than P and less then ATC you…
keep producing despite the loss
firms will produce in the short run as long as …
P is greater than AVC
output
how much the firm can produce
supply
how much the firm will produce
what are the 3 reasons why long and short run differ
new firms can enter/old firms can leave, existing firms can change their output level, firms can change their operation (plant) size
if competition is legally prohibited
government monopoly
if competition is NOT legally prohibited
market monopoly
perfect price discrimination
seller charges the highest price that each consumer is willing to pay
second degree price discrimination
seller charges one price for a specefic quantity and a lower price for a higher quantity ( buy one get one 50%)
third degree price discrimination
seller charges different prices to different segments of the population , if you belong to a certain group ex; veterans, students, seniors
“different markets”
seller charges more simply based on where you are ex; Disney, airport, concert, sports venue
what are the conditions for price discrimination
seller must have some control over price, can distinguish between buyers ability and willingness to pay, reselling the good must not be possible
firm interdependence
decisions made by 1 firm affects the decisions of other firms
in the long run …
profits are zero
Long run
1-economies of scale
ATC is falling price is also falling
Long run
2- constant returns to scale
ATC is flat price is also flat
Long run
3- diseconomies of scale
ATC is rising price is also rising
concentration ratios
the percent of total sales that are controlled by the top few firms
firms produce where
MR=MC
