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Econ 303 Micro > Exam 3 > Flashcards

Exam 3 Flashcards

1
Q

monopoly

A

-industry with a single seller that sells a good for which there are no close substitutes e.g. USPS

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2
Q

in monopolies produce as long as

A

MR>MC

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3
Q

monopolies - profit maximization

A

MC=MR

  • will charge the highest P willing to pay
  • take that Q then go all the way up to the demand curve to find the price
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4
Q

total costs in monopolies

A

P where the Q intersects the ATC curve

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5
Q

monopolies’ profits

A
  • might not exist

- when do exist will not be competed away

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6
Q

monopolies- price is _____ to MR

A

greater than MR

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7
Q

MR curve (mathematically)

A

2 times the slope of the inverse demand curve

-keep y-intercept the same as in inverse D curve

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8
Q

Lerner Index equation

A

(P-MC/P)=(-1/Ed)

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9
Q

Lerner Index definition

A
  • measure of monopoly power
  • % by which its MR (P) exceeded MC
  • the higher, the more power
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10
Q

slope=

A

y intercept/x intercept

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11
Q

price taker

A
  • no market power

- competitive

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12
Q

price maker

A
  • does not have market power

- monopoly

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13
Q

price discrimination

A
  • the practice of charging different prices to difference customers for the same product
  • 3 degrees
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14
Q

perfect price discrimination (1st degree)

A
  • charge every consumer the highest price they are willing to pay
  • no CS
  • no DWL
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15
Q

1st degree price discrimination (monopoly)

A

CS=A PS=B DWL=C

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16
Q

1st degree price discrimination (competition)

A

CS=A+B+C PS=0 DWL=0

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17
Q

rent seeking

A

-try to obtain a monopoly position for yourself so you can get the rents

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18
Q

in perfect price discrimination the MR

A

=D curve

19
Q

3rd degree

A
  • you put ppl into different markets and charge a different price per market (segmenting)
  • charge a lower price w/markets with greater elasticity b/c Q increases by a bigger % and raises TR
20
Q

to get customers to reveal themselves

A

through their elasticities of demand

21
Q

price sensitive get what price? why?

A

because they have a higher Ed

22
Q

segmented profits

A

exceed those of an unsegmented market

23
Q

How to find P and Q for both markets without segmenting

A
  1. convert to regular demand curve
  2. add the regular demand curves together
  3. convert back to inverse and find MR
  4. set MR=MC to find P
  5. plug Q into the total demand curve
24
Q

How to find P and Q and profits for each market with segmenting

A
  1. take inverse demand curve
  2. find MR curve
  3. set MR=MC
  4. solve for P
  5. get Q
  6. P-MC
  7. take (P-MC)(profit max. Q)
25
Q

2nd degree price discrimination

A
  • can’t tell consumer’s demand
  • Q discounts
  • versioning
  • coupons
26
Q

Quantity discounts

A
  • with lower elasticity of demand, can charge higher price cause so seldomly participate that commission not a big deal
  • higher elasticity of demand, charge lower price cause participate often and are sensitive to price
27
Q

versioning/ price cut margins

A
  • a firm offers diff. product options designed to attract diff. kinds of customers
  • will buy what gives them the most surplus
28
Q

neg. correlating bundling

A

then bundling will allow company to raise revenues and profits

29
Q

pos. correlating bundling

A

bundling doesn’t impact TR and profits

30
Q

simultaneous games

A

the participants choose their actions at the same time with out knowing each others actions

31
Q

repeated games

A

series of simultaneous games among the same set of actors

32
Q

sequential games

A

players take turns making decisions

33
Q

prisoner’s dilemma

A

any game where if the players do what is in their own self interest they end up worse off

34
Q

games of pure strategy

A

a player chooses an action w/100% certainty

35
Q

mixed strategy

A

player chooses a strategy randomly

36
Q

maximin strategy

A

used to minimize loss

37
Q

use what to solve repeated games?

A

backward induction- start in the last round and determine the outcome then work your way back to the starting point

38
Q

if there is a definite stopping point in a repeated game then…

A

there will be no cooperation

39
Q

grim trigger strategy

A

start out cooperating but if the other player ever failts to cooperate, will punish the player until the end of time no matter what the other player does

40
Q

discount rate

A

how you value the future

  • closer to 1=more patient
  • closer to 0=more impatient
41
Q

tit for tat

A

do what the other person did to you–willing to forgive

42
Q

how to solve a sequential game

A

use backward induction

  • determine the outcome for the second chooser
  • then choose the best outcome for the 1st chooser based on the 2nd chooser’s actions
43
Q

first mover advantage

A

if you’re the first mover and you make a commitment it is often seen as credible so have the advantage and achieve goals

Econ 303 Micro (3 decks)

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