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Economics > Midterm 3 > Flashcards

Midterm 3 Flashcards

1
Q

What are the different Market Structures in S-R

A

Pure Competition Market
Monopoly
Monopolistic Competition
Oligopoly

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2
Q

What makes the 4 types of markets different

A

Whether they are homogeneous or differentiate, number of firms in the industry and ease of entry and exit of the industry.

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3
Q

What is Pure Competition Market

A

A large number of firms in the industry’s each producing a small fraction of total output.

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4
Q

In Pure Competition Market is it easy or difficult to enter and exit the industry.

A

There is a easy entry and exit of the industry

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5
Q

What affect does the large number of firms in Pure Competition Market have on the price of products

A

There is not a lot of control of price

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6
Q

Look at Graphs for Pure Competition Market S-R

A

Look at graphs for Pure Competition market S-R

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7
Q

Look at Graphs for Pure Competition Market L-R

A

Look at Graphs for Pure Competition Market L-R

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8
Q

What is Productive efficiency

A

It exists when firms use the least cost method of production when producing output.

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9
Q

What is Allocative efficiency

A

Exists when societies scarce resources are directed towards producing the goods most wanted by consumers.

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10
Q

Productive efficiency =?

A

Min AC

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11
Q

Allocative efficiency =?

A

P=MC

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12
Q

What is Monopoly Market Structure

A

There is only one firm in the industry
There are no close substitutes
There are barriers to enter the industry
The firm in this market is a price maker

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13
Q

Examples of Monopoly Markets

A

Water industry
Electricity Industry
Gas Industry

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14
Q

What kind of barriers are there when entering a Monopoly market

A

Legal Barriers
Natural Barriers

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15
Q

What are some examples of Legal Barriers

A

Patent, research and development, licenses, ownership or control of natural resources

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16
Q

Look at Graphs on Monopoly Market Structure

A

Look at Graphs on Monopoly Market Structure

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17
Q

Do Monopoly Markets have Productive efficiency and or Allocative efficiency

A

No they do not because Monopoly markets do not produce at the min cost

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18
Q

What are the differences between Pure Competition Market and Monopoly Market

A

Monopoly markets charge more and produce less

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19
Q

What does a monopolist do?

A

They transfer income from consumers to stockholders who own the monopoly and impose tax on consumers to gain profit

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20
Q

What is price discrimination

A

Can make more money if market is separated

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21
Q

What are some conditions for price discrimination

A

Producers have control on price, elasticity of demand should be different in different market

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22
Q

What is a Monopolistic Market Structure

A

Relatively large number of firms each producing a small function of total output.

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23
Q

In a monopolistic market what do the firms produce compared to each other

A

Firms produce similar but differentiated products which comes in form of brand names

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24
Q

Is it easy to go in and out of a Monopolistic market

A

Its relatively easy

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25
Q

In a Monopolistic market what is one thing that is very important

A

Advertising

26
Q

What are some examples of a Monopolistic Market

A

Kid clothing, mining, grocery stores, gas station

27
Q

What does it take to be qualified as Monopolistic competition

A

If the output of the 4 largest firms relative to output of the whole industry is less than 40%

28
Q

LOOK AT GRAPHS

A

LOOK AT GRAPHS

29
Q

In a monopolistic market what will firms do if there is Economic Profit

A

More firms will enter the industry and the demand curve to shift to the left

30
Q

In a monopolistic market what will firms do if there is Economic loss

A

some firms will leave the industry shifting the demand curve to the right for the remaining firms

31
Q

In a Monopolistic market Productive efficiency exists when

A

When the firms produce the minimum point of ATC

32
Q

What is a Oligopoly Market Structure

A

A market where a few powerful firms produce similar and differentiated products and control the market

33
Q

What are the two types of Oligopoly Markets

A

Homogenous Oligopoly
Differentiated Oligopoly

33
Q

What is mutual Interdependence

A

In order to set price for products they need to take into consideration the reaction of their rivals

33
Q

Smaller firms can merge to do what

A

Enjoy economies of scale

34
Q

LOOK AT PAY OFF MATRIX

A

LOOK AT PAY OFF MATRIX

34
Q

What is Game Theory

A

Study of how people behave in strategic ways

34
Q

What are some pricing strategies

A

Collusion
Price Leadership

35
Q

How does Collusion happen

A

When firms in a industry reach an agreement to fix prices and divide up the market to reduce competition

36
Q

What does Collusion resemble

A

A monopoly

37
Q

What are the two types of Collusion

A

Overt Collusion
Covert Collusion

38
Q

What is a Overt Collusion

A

Formal agreement among firms in the industry to set price and share market

39
Q

OPEC is the best example of what

A

A Cartel

40
Q

Most Collusions are what type

A

Covert

41
Q

What are examples of Non Price Competition

A

Advertising and research and devlopment

42
Q

Price Collusion depends on what

A

Compromises

43
Q

What usually happens during a recession

A

Average cost usually increases

44
Q

What is Price leadership

A

Where one firm usually the largest firm will set the price and other follow

45
Q

What is Demand for factors of production

A

Demand for input or factors of production in general like labor and capital depend on demand for goods and services that they helped produce

46
Q

Demand for resources is called what

A

Derived demand

47
Q

Why cant the labor force change the price of labor

A

Because there is a large number of employers each hiring small fractions of total labor force

48
Q

(Marginal Factor Cost) Marginal Resource Cost =

A

Change in TC / Change in Labor

49
Q

Marginal Revenue Product =

A

Change in TR / Change in Labor

50
Q

LOOK AT GRAPHS FOR RESOURCE DEMAND

A

LOOK AT GRAPHS FOR RESOURCE DEMAND

51
Q

Market Demand of Resources is what

A

A horizontal salvation of all individual demand curves for firms

52
Q

Determinants of Demand for Resources

A

A change in Demand for a product - More cost of resources
A change in productivity for resources - More demand
Change in Price of other resources - Substitute Resource / Complementary Resources

53
Q

If land and Capital are close substitutes and Pk goes down QDk goes up and DL goes down what is this

A

Substitution effect

54
Q

If Pk goes down and Cost of Production goes down and Dk goes up and DL goes up what is this

A

Output effect

55
Q

If L and K are complements

A

PK goes up QDK goes up and DL goes down

56
Q

What is Least Cost Combination

A

MPL / PL = MPk / Pk

57
Q

What is Profit Maximizing Combination

A

MRPL / PL = MRPk / Pk = 1

Economics (6 decks)

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