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AP MICRO > Imperfect Competition Test > Flashcards

Imperfect Competition Test Flashcards

1
Q

Is a monopoly a price maker of price taker?

A

Price maker

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2
Q

Do monopolies advertise?

A

Mainly with PR

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3
Q

Do monopolies have Barriers to exit/entry?

A

Extensive

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4
Q

Why do monopolies have a downward sloping demand curve?

A

They have to drop the price to sell the next unit

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5
Q

What are examples of monopolies?

A

Utilities, DeBeers diamonds, MLB, NFL, airlines

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6
Q

What are the barriers to entry for monopolies?

A

Economies of scale, legal, raw materials, pricing

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7
Q

What is price cutting?

A

Sell at a loss to get rid of your competition

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8
Q

What is dumping?

A

Flooding the market with a product so it losses its value to get rid of competition

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9
Q

What usually ends a monopolies power?

A

Technology

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10
Q

An unregulated monopoly is also called what?

A

Single price monopoly

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11
Q

Unregulated monopolies charge what price?

A

The same price for everyone

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12
Q

In an unregulated monopoly where is MR in relation to the D curve??

A

Below it

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13
Q

All imperfect firms must operate in the?

A

Elastic portion

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14
Q

Why is their no supply curve for a monopoly?

A

They create the supply

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15
Q

Do monopolists want the most profit per unit?

A

No most profit in general

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16
Q

Are monopolies immune to changes in demand or increased costs of resources?

A

No

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17
Q

Are monopolies allocative or productive efficiency?

A

Neither

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18
Q

What are the problems monopolies face?

A

EOS, x-inefficiency, rent seeking expenditures, technology

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19
Q

Why does EOS hurt monopolies?

A

Reduced output could lead to ineffienciency

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20
Q

Why does x-ineffienciency hurt monopolies?

A

They produce at higher costs than necessary because of poor management

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21
Q

Why do rent seeking expenditures hurt monopolies/ what are they?

A

They spend to much to maintain their monopoly, they fund legislators to get legislation passed in their favor

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22
Q

Why does technology hurt monopolies?

A

Don’t search for new technology because they don’t think they have competition and they become obsolete

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23
Q

What is a price discriminatory monopoly?

A

Sells different prices to different people

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24
Q

What makes a monopoly able to price discriminate?

A

It can segment the market, has a product that isn’t resell able, and it gets rid of consumer surplus

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25
Q

The MR and D curve for what type of monopoly is the same curve?

A

Price discriminatory

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26
Q

What would happen if monopolies tags should be regulated weren’t?

A

They would produce a lot less and many people would go without

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27
Q

Why can’t regulated monopolies produce at the socially optimal price?

A

They would be producing at a loss and be subsidized

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28
Q

Where do regulated monopolies produce?

A

The fair return price

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29
Q

Unregulated monopolies produce at what price?

A

The monopoly price

MR=MC up to D curve

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30
Q

Regulated monopolies produce at the fair return price which is where?

A

P=ATC

31
Q

Where is the socially optimal price?

A

P=MC

32
Q

A regulated monopoly graph is recognizable how?

A

The MC curve will be mainly below the ATC

33
Q

How many firms are in monopolistic competition?

A

About 40-50

34
Q

What kind of products for monopolist competitive firms produce?

A

Differentiated products

35
Q

Do monopolistic competitive firms have price control?

A

Some

36
Q

Do monopolistic competitive firms advertise?

A

Yes, a lot

37
Q

Are their barriers to exit/entry for monopolistic competition?

A

No, easy entry/exit

38
Q

Is monopolistic competition allocative or productive?

A

Neither

39
Q

What does monopolistic competition rely on to separate itself from rivals?

A

Brand Names, product attributes, services, and location

40
Q

The demand curve of a monopolistic competitive firm is more or less elastic than a monopoly’s?

A

More

41
Q

What are the goals of advertising?

A

To increase demand, and make demand more inelastic

42
Q

What monopolistic qualities does monopolistic competition have?

A

Some price control, demand above MR, Ads, neither efficiency

43
Q

What pure competitive qualities does monopolistic competition have?

A

Big # of firms, easy exit/ entry, no long run economic profit

44
Q

What does monopolistic competition do to sell more units?

A

Drop the price

45
Q

Does a monopolistic competition earn of profit in the long run?

A

No because of easy exit/entry

46
Q

What is earned in the long run for monopolistic competition?

A

Normal profit

47
Q

What makes the ATC curve tangent to the demand curve in monopolistic competition?

A

Excess capacity

48
Q

What is excess capacity?

A

Under allocation of resources; this occurs when the price and quantity produced is the normal profit

49
Q

How many producers are in an oligopoly?

A

A small #

50
Q

What type of products do oligopolies produce?

A

Differentiated or standardized

51
Q

What are differentiated products?

A

Consumer products, house held items, cars, tires, etc

52
Q

What are standardized products?

A

Steel, zinc, copper, etc

53
Q

Do oligopolies have price control?

A

Yes; mutual interdependence

54
Q

Are there barrier to exit/entry in oligopoly?

A

Monetary barrier to exit/entry

55
Q

What are tha barriers to entry for oligopoly?

A

Large EOS, patents, ads are costly, ownership of raw materials

56
Q

What is the concentration ratio?

A

The 4 largest firms sales

57
Q

What is wrong with the concentration ratio?

A

It gives the false impression that all 4 are equal

58
Q

What is the Herfindahl index?

A

It shows the dominance of each firm; it’s a squared percentage

59
Q

What is 100 squared on the Herfindahl index?

A

A pure monopoly

60
Q

What is collusion?

A

Price setting

61
Q

What are cartels?

A

They get together and agree on production quotas and sell at a common price to maximize price( they are each individually like miny monopolies)

62
Q

What is overt collusion?

A

It’s out in the open; like OPEC which is other countries, the US can’t interfere and control them

63
Q

What is covert or tacit collusion?

A

A gentlemen’s agreement, it is illegal

64
Q

What normally happens during collusion?

A

One firm is dominant and sets the price and the other follow suit

65
Q

What type of firm has collusion?

A

Oligopoly

66
Q

What type of efficiency is an oligopoly?

A

Neither

67
Q

What are the obstacles for collision?

A

Cost differences, # of firms, cheating; other firms entering the market, anti-trust laws, and recessions

68
Q

What happens in the elastic portion of an oligopoly?

A

The firm ignores rival’s price increases and it steals from or losses business to its rivals

69
Q

What happens in the inelastic portion of an oligopoly?

A

The firm will match rivals price changes and it steals business from other industries

70
Q

What price will on oligopoly charge?

A

MR=MC

71
Q

What are the types of imperfect competition?

A

Pure monopoly, monopolistic competition, and oligopoly

72
Q

What are common thins in imperfect completion?

A

Neither allocative or productive efficiency, downward sloping demand curves, MR is below demand for all graphs except discriminatory monopolies, have to operate in the elastic portion

73
Q

A single firm is the producer of a product that has no close substitutes

A

Monopoly

AP MICRO (4 decks)

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