micro 9 Flashcards
market
Consists of all the actual and potential buyers and sellers of a particular good.
market structure
Environment in which the buyers and sellers of the product operate.
market structure from the most competitive to the least:
Perfect Competition
Monopolistic competition
Oligopoly
Monopoly
characteristics of perfect competition
There are many buyers and sellers of a product, each too small to affect the price of the product
buyers and sellers are price takers
- The product is homogeneous
- There is perfect mobility of resources
- Economic agents have perfect knowledge of market conditions
Characteristics of monopolistic competition
–Many sellers and buyers
–Products are differentiated
–Perfect mobility of resources
-Easy entry into the industry
Characteristics of Oligopoly
–Few sellers
–Products may be homogeneous or differentiated
–Barriers to resource mobility
*Difficult entry into the industry
characteristics of monopoly
–Single seller and many buyers
–No close substitutes for product
–Significant barriers to resource mobility
firms are price takers
Firm’s Demand Curve = Market Price = Marginal Revenue
firms face diminishing returns
-Firm’s Supply Curve = Marginal Cost
-With Marginal Cost > Average Variable Cost
short run supply curve
The rising portion of the firm’s MC curve above the AVC curve or shut-down point
Perfect Competition: Long Run Equilibrium
-In the short-run, firms may endure losses.
*In the long-run, firms must cover costs.
The process of entry and exit will lead to economic profits being equal to 0. You can see this using two panels, one with the individual firm and one with the entire market
Foreign Exchange Rate
–Price of a foreign currency in terms of the domestic currency
Depreciation of Domestic Currency
–Increase in the price of a foreign currency relative to the domestic currency
Appreciation of Domestic Currency
–Decrease in the price of a foreign currency relative to the domestic currency
