The Firm and Market Structures Flashcards
Market structure can be broken down into four distinct categories: (4)
perfect competition, monopolistic competition, oligopoly, and monopoly
Price elasticity of demand
εP = –(% change in QD) ÷ (% change in P)
Consumer surplus is the area ____________
beneath
the demand curve and above the price paid
The most distinctive factor in monopolistic competition is _____________.
product differentiation
In the _________, each firm determines its profit-maximizing production level by assuming that the other firms’ output will not change.
Cournot assumption
The Nash equilibrium is present when _______.
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.
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 _________.
decisions are made sequentially.
A monopolist charges each customer the highest price the
customer is willing to pay.
First- degree price
discrimination
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.
Second- degree price discrimination
The Herfindahl–Hirschman index (HHI) calculation
Sum of market shares squared
Profits are maximized when MR = MC. For a monopoly, MR =
P[1 – 1/Ep]