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Micro Econ > Micro Econ > Flashcards

Micro Econ Flashcards

1
Q

what is known about fixed costs in the short run

A

in the short run at least one factor of production cannot be changed e.g. rent, adverts, capital goods

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2
Q

internal economies of scale

A
  • managerial
  • technological
  • risk-bearing
  • financial
  • marketing
  • purchasing
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3
Q

allocative efficiency

A

resources used to produce goods where the value to consumers through consumption is equal to marginal cost
maximised social welfare
MC = AR

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4
Q

productive efficiency

A

when products are produced at the lowest average cost
MC = AC

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5
Q

what are the characteristics of perfect competition

A
  • goods are homogenous
  • firms are price takers
  • many buyers and sellers
  • low barriers to entry/exit
  • perfect information and knowledge
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6
Q

what are the characteristics of monopolistic competition

A
  • goods are heterogeneous
  • firms are price setters
  • many buyers and sellers
  • low barriers to entry/exit
  • perfect information and knowledge
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7
Q

what is the diagram for perfect competition

A

in the long run they make normal profits

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8
Q

show an increase in revenue in a perfectly competitive market

A

increased in AR increases demand creating a new market equilibrium

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9
Q

what are the efficiencies of perfect competition

A
  • allocative efficiency
  • productive efficiency
  • no dynamic efficiency
  • no x-inefficiency
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10
Q

what is the diagram for monopolistic competition in the short run

A
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11
Q

what is the diagram for monopolistic competition in the long run

A
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12
Q

what are the efficiencies of monopolistic competition

A

in the long run - none
- not allocative efficiency
- not productive efficiency
- no dynamic efficiency
- no x-inefficiency

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13
Q

what five-firm concentration ratio is considered an oligopoly

A

greater than 50%

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14
Q

what are the key features of an oligopoly

A
  • interdependence
  • heterogeneous goods
  • barriers to entry
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15
Q

what is a natural monopoly

A

when the most efficient number of firms is one possibly due to high fixed costs e.g. tap water

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16
Q

what are the efficiencies of a monopoly

A
  • allocative inefficient
  • productive inefficient
  • dynamic efficient
  • x-inefficient
17
Q

what is the diagram for a natural monopoly

A
18
Q

what is the diagram for negative production externalities

A
19
Q

what is the diagram for positive consumption externalities

A
20
Q

what is an example of tacit collusion

A

pharmaceutical companies
petrol stations - BP and Shell

21
Q

supply and demand diagram of the incidence of tax on consumers and producers

A
22
Q

supply and demand diagram of the incidence of subsidy on consumers and producers

A
23
Q

what is the % change formula

A

((new - old) / old ) * 100

24
Q

what are the two reasons for natural monopolies and what are two examples

A
  • high sunk costs
  • huge economies of scale
  • e.g. NHS and TFL
25
Q

what is the 3rd degree price discrimination diagram

A
26
Q

what are the 3 requirements for 3rd degree price discrimination

A
  • able to set prices/some market power
  • able to differentiate consumers
  • able to prevent arbitrage/reselling
27
Q

what are the two main reasons firms engage in collusive behaviour

A
  • to reduce uncertainty
  • to increase profit
28
Q

key words when talking about collusion

A
  • interdependence
  • overt and tacit
  • game theory
29
Q

what % market share is considered a legal monopoly

A

25%

30
Q

what are the benefits of nationalisation

A

employees - trade unions more powerful
- greater job security
consumers - acts to improve social welfare
- allocatively efficient

31
Q

what is consumer inertia

A

the tendency of some consumers to continue buying the same product even when better options exist

32
Q

rationalisation

A

e.g. removing two heads of departments

33
Q

why do firms remain small

A
  • lack of skills/finance/resources
  • avoid diseconomies of scale
  • profit satificing
34
Q

what is a benefit of a NMW on firms

A

increased incentive -> increased productivity -> fall in unit cost

35
Q

what are the 3 ways firms compete on price

A
  1. price wars
  2. predatory pricing
  3. limit pricing
36
Q

what are the 3 ways firms compete on price

A
  1. price wars - baked beans in 1990s
  2. predatory pricing
  3. limit pricing - incumbent firm
37
Q

what are 3 ways firms firms compete over non-price

A
  1. Advertising - samsung and apple
  2. Loyalty cards -
  3. Branding - nike and adidas
  4. Quality

Micro Econ (2 decks)

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