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35 Cards in this Set
- Front
- Back
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Definition of Perfect Competition |
- Many firms - products are identical - very easy to enter market - price taker |
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Definition of Monopolistic Competition |
- Many firms - Products are different (differentiated) - very easy to enter market
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Definition of Oligopoly |
- Few firms - products may be differentiated or identical - hard to enter market |
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Definition of Monopoly |
- One firm - unique - blocked on entering market - can set their own price |
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what type of demand curve does a perfect competition market have? |
horizontal |
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if P>ATC |
there is profit |
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if P=ATC |
break even ( zero profit) |
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in a perfectly competitive market what does MR=? |
Average revenue, Price, and Demand |
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where will a firm maximize their profit? |
where MR=MC |
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profit= |
(P-ATC)Q or TR-TC |
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in the short run you don't produce anything if- |
TR<VC |
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if P<AVC |
don't produce anything |
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if P>AVC |
produce output at MR=MC |
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ATC= |
TC/Q |
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MC= |
change in TC/ change in Q |
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MR= |
change in TR/ change in Q |
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TR= |
PxQ |
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in a Monopolistic market the demand curve gives ? |
Price |
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in a perfect comp the MR curve is also the? |
Demand curve |
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how many curves do you draw in a monopolistic market? |
4 (MC,ATC,D,MR) |
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how many curves in a perfect competition ? |
3 (D,MC,ATC) |
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what does a price guarantee do for a firm? |
allows company to sell at highest price ( form of collusion but legal) |
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Natural monopoly- |
for a certain good one company can produce at a lower cost than 2 competitors combined. |
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for a monopoly how do the short and long run differ? |
they don't they are the same. |
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How does the government regulate monopolies prices? |
making them charge at where P= ATC so that the company only breaks even. |
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Economies of scale |
the situation when a firm's long run average costs fall as the firm increases output. |
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Game theory- |
study of the decisions of the firms in industries where the profits of a firm depend on its interactions with other firms. |
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Payoff Matrix |
a table that shows the payoffs that each firm earns from every combination of strategies by the firms. |
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collusion |
an agreement among firms to charge the same price or otherwise not to compete |
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Dominant strategy |
a strategy that is best for a firm, no matter what strategies other firms use. |
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Nash equilibrium |
a situation in which each firm chooses the best strategy given the strategies chosen by other firms. |
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cooperative equilibrium |
an equilibrium in a game in which players cooperate to increase their mutual payoff |
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noncooperative equilibrium |
equilibrium in a game in which players don't cooperate but pursue their own self-interest |
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prisoner's dilemma |
a game in which pursuing dominant strategies results in noncooperation that leaves everyone worse off. |
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sub-game perfect equilibrium |
when no player can make themselves better off by changing their decision at any decision node. each player only has one decision to make. |
