Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

micro > Pefect Competition,imperfectly competitive markets and monopoly > Flashcards

Pefect Competition,imperfectly competitive markets and monopoly Flashcards

1
Q

What are the perfect competition characteristics

A

-free entry and exit

-perfect knowledge

-Firms are price takers (prices are the same throughout the market )

-Perfectly elastic

-firms can make supernormal profit in the short run

-firms can make normal profit in the long run

-products in the markets are homogenous

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

When are avergae profits occur

A

Average Revenue-Average Costs

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

When does profit maximise?

A

MC=MR

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What do you do to find the total profit

A

You have to find the area of the rectangle.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

List the most copetitive to the least competitive markets in order?

A

-Perfect competition
-Monoploistic Competition
-Oligopoly
-Monopoly

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

What are the characteristics of a monopolistic market

A

-Many buyers and many sellers

-Different but similar products

-Thye are price makers to certain degree

-low barriers to entry

-imperfect knowledge(high knowledge)

-In the short-run firms make supernormal profit

-In the long-run firms make normal profit

-Demand curve is elastic (demand curve is slightly downward sloping )

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

How do you work out the profit/Average profit for per unit

A

total profit/Qunatity

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

How do you know there is profit?

A

When Average Revenue > Average Costs

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

What is a collusive oligopoly

A

Non-competing

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

What is a non-collusive oligopoly

A

-Competing

-Engages in price war

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Define price discrimination

A

Involves a firms charging different prices to different consumers for the same product.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

What may price determination depend on

A

Prices charged will depend on the consumer’s:
-Ability to pay
-Willingness to pay

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

How many levels of price discrimination are there?

A

-1st Degree/Perfect Price Discrimination
-2nd Degree Price Discrimination
-3rd Degree Price Discrimination

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What is 1st degree/perfect price discrimination

A

when the firms is able to charge the maximum possible price to individual consumers

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What is 2nd degree price discrimination

A

When the firm is able to charge the maximum possible price to different groups of consumers based on the quantity bought.Typical examples are with bulk buying
(the more tha tis broght the less is paid for per unit)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

What is 3rd degree price discrimination

A

When the firm identitfies groups of consumers with similar characteristics

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

What is consumer surplus

A

The difference between the maximum amount the consumer is willing and able to pay and what they actually pay

18
Q

What is producer surplus

A

The extra benefit a producer recieves when they sell a product for more than the minimum price they were willing to accept.

19
Q

What is bloc pricing

A

There are more than one group of consumers in the market and the firm is able to price discriminate by charging lower prices to those groups that are willing to buy more

20
Q

How may firms identify different groups of consumers to give discounts

A

Depending on the size of the order.The greater the bulk buying the higher the discount.

21
Q

What type of market structure usually price discriminate

A

Monopolies

22
Q

Why might a firm price disciminate

A

So they can maximise their profits

23
Q

What may be the disadvantages to consumers of price discrimination

A

-Price discimination usually results in a loss of consumer surplus.Since P>MC there is a loss of allocative efficiency

-It strengthens the monoploy power of firms,which could result in higher prices in the long-run for consumers

24
Q

What may be the advantages to consumers of price discrimination

A

-Consumers could benefit from a net welfare gains as a result of cross subsidisation,if they recieve a lower price.This is because some customers who were previously excluded by high prices might now be able to benefit from the goods and services,as people with higher income are charges more it allows less well-off people to also have access to goods at a lower price.

25
Q

What are the advantages to producers when price disciminating

A

-Producers make better use of spare capacity

-Higher supernormal profits,which results from price discrimination,could lead to stimulate investment

26
Q

What is the order of the market structures spectrum from left to right

A

-Perfect Competition
-Monopolistic Competition
-Oligopoly
-Monopoly

27
Q

On the market structure spectrum going from right to left can have two effects which are..

A

-Lower barriers to entry
-More contestable

28
Q

On the market structure spectrum going from left to right can have two effects which are…

A

-More maret power
-Less efficiency

29
Q

What is each market charaacterised by (3 things)

A

-The number of firms in the market
-The degree of rpoduct differentiation
-Ease of entry into the market

30
Q

Why may the degree of product differentiation matter

A

-The more differentiated the products,the less competitive the market

-The products can be differentiated using price,branding and quality.This affects cross price elasticity of demand.

31
Q

In what market structure would there be homogenous products

A

In a perfectly competitive market.

32
Q

Why may barriers to entry be designed to prevent new firms from entering the market profitably

A

As it the prevention can lead to increase in producer surplus.

33
Q

Examples of high barriers:

A

-Economics of scale
-Brand loyalty
-Having strong reputation
-Controlling the important technologies in the market

34
Q

When do firms break even

A

TR=TC

35
Q

What is the tradiditional theory of the firms based on

A

It is based upon the assumption that firms aim to maximise profits.

36
Q

Where is profit maximised

A

MC=MR

(extra unit produced gives no extra loss or no extra revenue)

37
Q

when do profits increase

A

MR>MC

38
Q

When do profits decrease

A

MC<MR

39
Q

why may firms maximise profits:

A

-greater wages and dividends ofr entrpreneurs
-retained profits are cheqap source of finance
-interests of owners and shareholder may be to maximise profits

40
Q
A

micro (5 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions