econ final elzenga sectuon 10

Question 1

Perfect competition characteristics

Answer 1

Each firm has very elastic demand, Firms are price takers, No entry or exit barriers, Buyers and sellers are fully informed, Product homogeneity

Question 2

Profit Maximizing Rule

Answer 2

MR=MC

Question 3

Inequality aversion

Answer 3

Would rather give up a small amount than allow someone to have a lot more than you

Question 4

Find profit/loss in PC

Answer 4

vertically up/down from demand to AC

Question 5

Long run profits in PC

Answer 5

no possible

Question 6

Shutdown point

Answer 6

AVC

Question 7

Theory of monopoly

Answer 7

Imperfect competition, must look at market to make sure it’s a monopoly

Question 8

Monopolists are…

Answer 8

price makers

Question 9

Characteristics of monopoly

Answer 9

no close substitutes, no new entries

Question 10

Monopolists MR curve is…

Answer 10

halfway between demand and Y axis

Question 11

Cartel

Answer 11

many firms acting as a monopoly

Question 12

Cartel theory

Answer 12

incentive to join and leave

Question 13

Free-rider firm

Answer 13

produces more than the set output at the cartel price

Question 14

Keep competition at bay

Answer 14

Cartels or mergers, Patents and tariffs, Superior entrepreneurial ability, Control over input, Economies of scale, Network effects, TV ads

Question 15

Commitment devices

Answer 15

force yourself to keep goal

Question 16

Arthur Cecil Pigou

Answer 16

Followed Marshall, founder of modern welfare economics, difference between private and social costs

Question 17

Positive externality example

Answer 17

flu shot

Question 18

Negative externality example

Answer 18

pollution

Question 19

Negative externalities lead to

Answer 19

overproduction

Question 20

Positive externalities lead to

Answer 20

underproduction