Econ Test 3

Front 1

allocative efficiency (concept)

Back 1

1. all consumers willing to pay cost of production gets the good
2. social welfare is maximized

Front 2

productive efficiency (concept)

Back 2

1. P = min ATC
2. maximize production

Front 3

allocative efficiency (formula)

Back 3

price = marginal cost

Front 4

productive efficiency (formula)

Back 4

price = minimum ATC

Front 5

dynamic efficiency

Back 5

if monopolist spends profits on new technology, then (we might get higher growth) higher growth is possible (a case FOR monopoly)

Front 6

reasons for advertising

Back 6

1. increase demand
2. introduce a new product
3. take advantage of economies of scale

Front 7

types of advertising

Back 7

1. informative (reduce search and info costs)
2. persuasive (provide little info., try to convince consumer)

Front 8

consumer benefits of advertising

Back 8

1. introduce a new product (S increases P decreases)
2. economies of scale ( costly --> P decreases)
3. reduce search and info costs

Front 9

criticisms of advertising

Back 9

1. is a nonproductive of wasted resources for "stealing" profits
2. it increases prices (costs go up so profit goes down)

Front 10

case against monopoly competition

Back 10

1. P > MC (no allocative efficiency)
2. P > min LRATC (no productive eff.)
3. P > min SRATC (excess capacity)

** price is BIGGER than all these costs

Front 11

case for monopoly competition

Back 11

1. variety good
2. consumers value options

Front 12

LR competitive equilibrium (formulas)

Back 12

1. LR economic profit = 0
2. Qs = Qd

Front 13

Marginal reveune (forumla)

Back 13

MR = change total revenue

Front 14

monopoly

Back 14

a firm that is the only seller of a good, with no competition

Front 15

price taker

Back 15

(in a ompetitive market), buyers and sellers cannot decide what price they will accept, since they have no significant influence on the much larger market. Insteadm they have to accept the market price and make their decisions accoedingly

Front 16

price discrimination

Back 16

practice of charging different groups of buyers different prices based on differences in elasticity rather than cost

Front 17

conditions for price discrimination

Back 17

1. some monopoly power
2. two groups of buyers with different Ep
3. prevention of resale

Front 18

Monopolistic competition

Back 18

1. many small buyers and sellers
2. differentiated products (products that vary from one producer to the next)
3. no barriers to entry or exit

Front 19

homogeneous products

Back 19

products that are identical, no matter which firms in the industry produce the commodities

Front 20

barrier to entry (def.)

Back 20

exist when investors find obstacles to joining a profitable industry. This includes anything that makes producing and selling output more difficult for a new firm than for an existing one.

Front 21

types of barriers to entry

Back 21

1. public franchise
2. government license
3. economies of scale

Front 22

normal rate of return

Back 22

the minimum profit necessicary to attract and retain investment

Front 23

factors that shift demand

Back 23

demand and price are inveresly related.
affected by changes in income, price and relative price

Front 24

profit (formula)

Back 24

quantity x (price - average cost)

Front 25

total revenue (formula)

Back 25

price x quantity

Front 26

profit maximization (formula)

Back 26

MC = MR

Front 27

breakeven price (formula)

Back 27

economic profit = 0

Front 28

shutdown price (formula)

Back 28

price = average variable cost

Front 29

total cost (formula)

Back 29

total fixed cost + total variable cost

Front 30

characteristic of perfect competition

Back 30

1. homogeneous products
2. no barriers to entry or exit
3. perfect information