Other Micro Flashcards
What is market failure?
Market failure is when the price mechanism leads to a misallocation of resources.
What are the 4 reasons that could lead to the price mechanism failing?
Negative externalities
Positive externalities
Public goods
Information gaps
What are the characteristics of an oligopoly?
Few large sellers
High barriers to entry/exit
Differentiated goods/services
Interdependence
What are the characteristics of a perfect competition?
Many buyers and sellers
No barriers to entry/exit
Homogeneous goods
Perfect information
What are the characteristics of a monopoly?
A single seller
High barriers to entry/exit
A lack substitute goods
Define Marginal Physical Product of Labour (MPP)
Marginal Physical Product of labour is the amount of output produced by each additional worker
Define Marginal Revenue Product of labour (MRP)
Marginal Revenue Product of labour is the amount of extra revenue that an additional worker will bring into the firm.
How to calculate Marginal Revenue Product of labour (MRP)?
Marginal Revenue(MR)×Marginal Physical Product(MPP)
What is X-inefficiency?
When a firm is producing above its average cost curve for a given level of output.
What is dynamic efficiency?
How changing technology improve a firm’s potential output over time?
What condition is needed for a firm to be dynamically efficient and why?
They need to be making supernormal profits (AR>AC) as they need to invest in R&D to discover new technologies.
What are the 2 main conditions for price discrimination?
Market power and Information
What was the cost of alcohol to UK society and NHS?
UK society: £21bn year
UK NHS: £3-£5bn year
What is supernormal profit and subnormal profit?
Super: TR>TC
Sub: TR<TC
What are the 6 micro diagrams?
PPF
Lorenz
Kinked
Wage surplus
S/D
Negative externalities
