The Firm and Market Structures Flashcards

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1
Q

Market structure can be broken down into four distinct categories: (4)

A

perfect competition, monopolistic competition, oligopoly, and monopoly

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2
Q

Price elasticity of demand

A

εP = –(% change in QD) ÷ (% change in P)

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3
Q

Consumer surplus is the area ____________

A

beneath

the demand curve and above the price paid

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4
Q

The most distinctive factor in monopolistic competition is _____________.

A

product differentiation

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5
Q

In the _________, each firm determines its profit-maximizing production level by assuming that the other firms’ output will not change.

A

Cournot assumption

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6
Q

The Nash equilibrium is present when _______.

A

two or more participants
in a non- cooperative game have no incentive to deviate from their respective equilibrium strategies after they have considered and anticipated their opponent’s rational
choices or strategies.

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7
Q

The important
difference between the Cournot model and the Stackelberg model is that Cournot
assumes that in a duopoly market, decision making is simultaneous, while Stackelberg
assumes that _________.

A

decisions are made sequentially.

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8
Q

A monopolist charges each customer the highest price the

customer is willing to pay.

A

First- degree price

discrimination

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9
Q

The monopolist offers a menu of quantity based pricing options designed to induce customers to self- select based on how
highly they value the product.

A

Second- degree price discrimination

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10
Q

The Herfindahl–Hirschman index (HHI) calculation

A

Sum of market shares squared

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11
Q

Profits are maximized when MR = MC. For a monopoly, MR =

A

P[1 – 1/Ep]

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