Second Exam Stuff 50% Flashcards
Conditions of Perfect Competition
All companies sell identical products,
market share does not influence price,
companies are able to enter or exit without barriers,
buyers have perfect or full information,
and companies cannot determine prices.
Perfect Competition
Defining characteristics of SR equilibrium, LR equilibrium
In LR, companies will have zero economic profits,
Possible to have economic profits in the SR
The demand curve within Perfect Competition is
Flat baby!
Shutdown point
If the market price that a perfectly competitive firm faces is above average variable cost, but below average cost, then the firm should continue producing in the short run, but exit in the long run. We call the point where the marginal cost curve crosses the average variable cost curve the shutdown point.
Shutdown when
Monopolistic Competition - Number of Firms
Large - Many - Numerous - Thicc ums
Monopolistic Competition - Efficient?
It is not productively efficient because it does not produce at the minimum of its average cost curve. A monopolistically competitive firm is not allocatively efficient because it does not produce where P = MC, but instead produces where P > MC.
Monopolistic Competition - Examples
Restaurants, hair salons, household items, and clothing
Oligopoly - How many producers?
A few
Oligopoly - Efficient?
Oligopolies tend to be both allocatively and productively inefficient. At profit maximizing equilibrium, P, price is above MC, and output, Q, is less than the productively efficient output, Q1, at point A.
Oligopoly - Examples
Steel manufacturing, oil, railroads, tire manufacturing, grocery store chains, and wireless carriers.
Monopoly - How many?
One - Uno - Single boi
Monopoly - Efficient?
A monopoly is productively inefficient because the output does not occur at the lowest point on the AC curve.
A monopoly will produce less output and sell at a higher price to maximize profit at Qm and Pm. Thus, monopolies don’t produce enough output to be allocatively efficient.
Monopoly - Examples
Microsoft and Windows, DeBeers and diamonds, your local natural gas company.
Monopoly - SR and LR Charcateristics
In the short run, a monopolist may make a profit or incur a loss, depending on its costs and the market price. Because the monopolist has complete control over the market, it can set the price of its product at a level that maximizes its profits.
In the long run, a monopolist will still earn a profit, as there are barriers to entry that prevent new firms from entering the market.
Game theory - Which market Structure?
Oligopoly
