Dynamics Of Imperfect Markets Flashcards
What is true when it comes to marginal revenue
The marginal revenue is always lower than the price of the product except for the first unit sold
Look at graphs in booklet
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What are the three examples of imperfect markets
Monopolies
Oligopolies
Monopolistic Competition
What is a monopoly in its pure form
A market structure in which there is only one seller of a good or service that has no close substitutes
How does the demand curve slope in an imperfect market
It is a downward sloping demand curve
Where does the marginal revenue curve intersect the horizontal axis
At a point that is exactly halfway between the origin and the point of intersection of the demand curve
Look at graphs and points in booklet
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What is short term equilibrium and how is it achieved
Where marginal cost = Marginal Revenue
The business increases production to a point where production cost of the last unit is equal to the revenue it earns
What does a monopolist do when they make losses in the short term
They will expand their plant size so that they can make profits
What does a monopolist do when they make a profit in the short term
They will expand production further to make more profits
What is an oligopoly
A market structure in which a few sellers dominate the market
Each seller does not influence the others but has to consider them
What is an oligopoly with only two businesses
Duopoly
What does a kinked demand curve illustrate in an oligopoly
The interdependence and uncertainty in oligpolies
If a firm raises or reduces its price, the outcome will be determined by the reaction of its competitors
What are a firm’s three options when it comes to price in an oligopoly
Increase Price
Decrease Price
Keep price the same
What happens if a firm increases price in an oligopoly
It’s most likely that the other firms will not increase their prices
The firm will end up losing customers and will see a decrease in quantity demanded
