Micro

Question 1

Monopoly Profit maximization

Answer 1

π = p(q) * q-C(q)
(Revenue menos costs)
Donde
q= firm lvl demand curve
p(q) = price depends on amount of supplies.

Perfectly competitive markets: Perfect competitive markets

Question 2

Marginal revenue, marginal.cost

Answer 2

Marginal revenue
π’ = p’ (q)*q+p(q)

Marginal cost
C’q

Question 3

Demand elasticity

Answer 3

ε^d = △q(p)/△p * p/q

Question 4

Price elasticity of demand

Answer 4

Formula=
ε_d=δQ/δP × P* /Q*
La derivada de P respecto de Q, y luego
ε =1 unitary elastic
ε> 1 elastic
ε< 1 inelastic

Question 5

Competitive model facts

Answer 5

Fact #1 in competitive markets w/ identical firms long run market supply is horizontal
Fact #2 income competitive market firm level.demand is horizontal

Question 6

Market power

Answer 6

Market power is ε/(1+ε)
¿Por qué?
Porque MR = p(q) (1 + 1/ε) = MC
Y rearranging…
p(q)/MC = 1/ (1+ 1/ε) = ε/(1+ε)

Question 7

Lerner index

Answer 7

P(q)-MC/ p(q) = -1/ε

Es una medida economica que evalúa el grado de poder de mercado de una empresa a través de la elasticidad de cuánto venden y a qué precio.

Question 8

Recap #1 is it better quotas or tariffs? What is the relation between MR and MC in C.Mkt

Answer 8

1.When govs set quotas instead of tariffs society loses tax revenue.
2. In competitive markets, Every profit max. Firm sets output where Marginal Revenue= Marginal Cost.

Question 9

A monopolist would neve set Q where …

Answer 9

Demand is inelastic

Question 10

Market Power Guarantees
…

Answer 10

Price > cost
In competitive markets price=cost

Question 11

A natural monopoly depends on…

Answer 11

• Cost function
• barriers to entry
• patents. Pp.ii.

Question 12

Network externality is…

Answer 12

The demand depends on the consumption of the good by others. Benefit of the network size(FB), peer effects.

Question 13

Nash equilibrium is ….

Answer 13

A situation in which no actor can improve his utility by changing his actions unless at least one other actor changes his/her action too.

Question 14

In cournot model

Answer 14

Firms choose quantities simultaneously, thus, the second actor has to lower the price each time.

Question 15

Stackelberg is…

Answer 15

A variation of cournot model, in which there are “LEADERS” and “FOLLOWERS”. We calculate the best response function for the follower. LEADER will profit more because by moving first he can CREDIBLY COMMIT to his output choice. In cournot we optimize first. In Stackelberg, we optimize after

Question 16

Cuánto produce el monopolista?Formula de MR?

Answer 16

Monopolist produces:
MC=MR

δR/δq = derivamos la q en la formula de revenue.
“Mark up” es aquello que el monopolista va a cobrar de sobreprecio.

Question 17

Bertrand model

Answer 17

The firm chooses the price and market sets quantity.
You cannot get lower than your Marginal Cost.

Question 18

Producer Surplus

Answer 18

PS = R-VC
Revenue - variable costs = producer surplus.
the triangular area formed above the supply line over to the market price.

Question 19

Welfare

Answer 19

W= CS + PS

Question 20

Consumer surplus

Answer 20

It is the AREA UNDER THE DEMAND CURVE AND ABOVE THE MARKET PRICE UP TO THE QUANTITY.

Difference between
“what consumer is willing to pay “
vs.
“What the quantity of the good actually costs”

Question 21

Dead weight loss (DWL)

Answer 21

A net reduction in welfare from loses of surplus. Often happens because of actions that move the market away from the competitive equilibrium.

Question 22

REVENUE FORMULA

Answer 22

Revenue= P*Q

Recuerdan que nos dan la.formula de precio y normalmente incluye a Q todo eso lo multiplicas por Q. Es normal que te de cuadrado.
Luego de eso derivas a Q respecto de R y te da el valor Q, el cual luego incluimos en la formula de precio para sacar P.

Question 23

Como.sacar MC

Answer 23

δC / δQ

La derivada de Q respecto se C en la funcion de costos. Hay que derivar Q!

Question 24

Tips de ejercicios de Best Response.

Answer 24

Q = q_a + q_b… + q_n
π = (q_n * p) - C_n

Question 25

Coase theorem

Answer 25

If we assign property rights no matter who, the outcome will be efficient because of negotiation. But stil, the outcome will be efficient to society. This assimes that there are no transaction costs.