ECON Final Exam Flashcards
Pure monopoly characteristics
of firms, type of products, barriers to entry, control over price, role of non-price competition
Pure monopoly # of firms
just 1 firm; the firm is the industry
Pure monopoly type of product
unique; no close substitutes
Pure monopoly barriers to entry
quite high barriers, 4 types
4 types of barriers to entry in a pure monopoly
Legal (erected by govt): patents, copyrights, franchises
Exclusive control of an important input: ALCOA, DeBeers
Network Externalities
Economies of Scale
Pure Monopoly control over price
the firm is a price maker
Pure monopoly role of non-price competition
is present. Product promotion, and product development
Single-Price Monopoly
all units sold in any time period, sell for the same price
2 Types of mergers
horizontal
vertical
Guidelines for mergers
market must be defined
measurement of concentration (compute HHI)
Merger standards
Herfindahl-Hirschman Index (HHI)
in a monopoly, HHI=100^2=10,000
in a duopoly, HHI=50^2=5,000
Take share % of sales and square it, add all up to get total HHI
HHI < 1,500
merger is approved
1,500 < HHI < 2,500
might try to block
If HHI increased by less than 100
no challenge, let it go
If HHI increased by more than 100
may be a challenge
HHI > 2,500
if increased by less than 100, no challenge. If increased by between 100 - 200, may challenge. If increased by more than 200, will challenge.
Monopolistic Competition # of firms
a large #, but less than in # in perfect competition
Monopolistic Competition Type of Product
Differentiated - similar but not identical
Monopolistic Competition Barriers to Entry
Low, not difficult to get into
Monopolistic Competition Control Over Price
not much
Monopolistic Competition Role of Non-Price Competition
is present
Oligopoly # of Firms
a few firms are dominate, although there may be competitive fringe
Oligopoly Type of Product
may be standardized (steel, aluminum) or may be differentiated (Cars)
Oligopoly Barriers to Entry
tend to be high, hard to get into
Oligopoly Control Over Price
there is less control than one might expect
Oligopoly Role of Non-Price Competition
tends to be significant
Game Theory
an analytical tool used in situations where players competing in certain playoffs must consider the reactions of other players in making decisions
Dominant Strategy
pursue it no matter what the other guy does
Nash Equilibrium
when each player is doing the best they can, given what the others are doing
Marginal Revenue Product (MRP)
the additional revenue resulting from the employment of another worker. MRP= change in TR/change in L or MRP=PxMP
Shifters of the Market Demand of Labor
Human capital, better technology, larger quantity of capital, changes in product price, number of buyers
Leisure has an opportunity cost of
the wage
An increase in the wage will induce
the substitute of work for leisure
Due to income effect, and assuming leisure is a normal good,
individuals will want more leisure (less work)
Shifters in Market Supply of Labor
Population(# of sellers, immigration), Demographics(baby boomers, participation rate of women), other employment alternatives
3 additional factors
Compensating Differentials
Discrimination
Labor unions
Compensating Differentials
Compensating for the nastyness or dirtyness of the job
2 types of Discrimination
Economic Discrimination
Statistical Discrimination
Economic descrimination
racism, sexism
Statistical Discrimination
Experience
Education
Job Preferences
Monopsony
one buyer
MFC=
change in TC/ change in L
P=
Price of the product
TR=
PxQ
TC=
Wage of Labor + 5
MP=
change in Q/ change in L
EP=
TR-TC
