Unit three Flashcards

0
Q

To sell more goods, a monopolist must

A

lower the price

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1
Q

A monopolist is a

A

price maker–put up barriers of entry

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2
Q

In the long run of a monopoly

A

NOTHING WILL HAPPEN

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3
Q

A monopoly’s demand curve is

A

down sloping

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4
Q

The quantity produced by a monopoly is determined by

A

the intersection of MR and MC

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5
Q

The price of a monopoly is determined by

A

the intersection of the quantity and the demand

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6
Q

How do we determine elasticity?

A

The marginal revenue intersects the x axis when it is unit elastic and to the right it is inelastic and to the left it is elastic

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7
Q

Allocative efficiency is found where

A

The graph is unit elastic

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8
Q

Socially optimal is when

A

p=mc

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9
Q

The result of perfect price discrimination is

A

Marginal revenue=demand

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10
Q

Regulation of a typical monopoly leads to

A

less monopoly profit but it is socially optimal

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11
Q

Regulation of a natural monopoly leads to

A

loss for the firm and ends up being a compromise with zero economic profit

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12
Q

Lump Sum

A
  • Fixed costs

- If there is an increase in the lump sum, the ATC increases, the profit decreases and nothing else changes

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13
Q

Per unit

A
  • Variable costs

- If there is an increase in per unit, the ATC, MC, and Price increase and output decreases

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14
Q

Three things necessary to price discriminate

A

1) Monopoly power (price setting)
2) Ability to separate people into groups
3) No resale

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15
Q

Characteristics of monopolistic competition

A
  • relatively easy entry and exit
  • advertising
  • not the exact same product
16
Q

Order of market structures from most firms to least

A

Perfect competition, monopolistic competition, oligopoly, monopoly

17
Q

Monopolistic competition graph is

A

The same is PC graph

18
Q

Firms have a dependent nature which gives incentive to

A

Collude and to cheat

19
Q

Dominant strategy

A

No matter what the opponent does, one option is better

20
Q

NASH equilibrium

A

When no player can independently make themselves better off

21
Q

Herfindahl Index

A

A measure of the concentration and competitiveness of an industry. The sum of the squared percentage market shares of the individual firms in the industry.

22
Q

As output increases, total fixed cost

A

stays the same

23
Q

Relationship between MC and MP is

24
Only cost on a long run graph is
ATC
25
In Perfect Competition, if more firms enter then the output and price will
decrease for the typcial firm
26
What costs change the output?
Variable costs
27
Order of monopolies from the smallest to the greatest amount of consumer surplus
Price discriminant monopolist, single price monopoly, perfectly competitive monopoly
28
In a natural monopoly,
the long run ATC is still declining when it intersects demand
29
Price Leadership
Collusion when the "dominant firm" initiates the price
30
If a typical firm in monopolistic competition is making economic profits then in the long run,
demand will decrease
31
Which market structures have differentiated products?
Oligopoly and monopolistic competition
32
Which market structures have economic profit in the long run?
Oligopoly and monopoly
33
Which structures achieve productive efficiency in the long run?
Perfect Competition
34
Which structures have zero economic profit in the long run?
Perfect competition and monopolistic competition
35
Do ologopolists have incentive to change price?
No
36
Economies of Scale
The situation when the firm's total cost of producing a product decreases in the long run as the firm increases the size of its plant and its output
37
Diseconomies of scale
The situation when a firm's average total cost increases in the long run as the size of its plant and output increases
38
Shut down point
Minimum AVC