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11 Cards in this Set
- Front
- Back
MR=P=MC
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Profit maximization under perfect competition
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How do owners of many firms compensate their managers to promote profit maximization?
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By giving them a share of the firm's profits
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What is the price of shares of stock in a firm based upon?
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Firm's profitability
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What is the short term shutdown rule?
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P<AVC
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What is the long term shutdown rule?
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P<ATC
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What are the four causes of monopolies?
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1. Scarce Resources
2. Legal Barriers 3. Network Externalities 4. Economies of Scale |
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P>MR=MC
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Profit maximization under a monopoly
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P[1-1/|E|]
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Marginal Revenue of Monopoly
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P-MC/P=1/|E|
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Profit-Maximizing Markup
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What is the social inefficiency of monopolies?
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failure to price discriminate perfectly
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5 Policy Alternatives for Natural Monopolies:
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1. State Ownership and Management
2. State Regulation of Private Monopolies 3. Exclusive Contracting for Natural Monopoly 4. Vigorous Enforcement of Antitrust Laws 5. Laissez-Faire Policy |