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58 Cards in this Set
- Front
- Back
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4 types Market Structure |
Perfect Competition Monopolistic Competition Oligopoly Monopoly |
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Perfect competition |
Number of Firms: Many Types of Product: Identical Ease of Entry: High Examples: Growing wheat/apples Efficiency: Both Allocative and Productive |
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Monopolistic Competition |
Number of Firms: Many Types of Products: Differentiated Ease of Entry: High Examples: Clothing Stores, Restaurant Efficiency: Neither Allocative or Productive |
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Oligopoly |
Number of Firms: Few Types of Products: Identical or Differentiated Ease of Entry: Low Examples: Manufacture Cars, Manufacture Computers |
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Monopoly
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Number of firms: One Types of Products:Unique Ease of Entry: Entry Blocked Examples: First-Class Mail delivery, Tap Water |
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Price-Takers |
is an investor whose buying or selling transactions are assumed to have no effect on the market.
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Profit |
Total Revenue-Total cost=Profit Profit=(PxQ)-TC |
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Price(Perfect Competition) |
Average Revenue=Price=Marginal Revenue |
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Average Revenue |
Total revenue divided by the quantity of the product sold |
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Marginal Revenue |
the change in total revenue from selling one more unit of a product |
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Suck Costs |
coststhat have already been paid and cannot be recovered, because even if theyhaven’t literally been paid yet, the firm is still obliged to pay them.
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long-runcompetitive equilibrium
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-If firms are making an economicprofit, additional firms enter the market, driving down price to the break-evenlevel. -If firms are making an economicloss, existing firms exit the market, driving price up to the break-even level. -Thesituation in which the entry and exit of firms has resulted in the typical firmbreaking even.p_01 |
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Long-run supply curve |
A curve that shows the relationshipin the long run between market price and the quantity supplied
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Product Effiecency |
is a situation in which a good orservice is produced at the lowest possible cost
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Allocative Efficiency |
is a state of the economy in whichproduction represents consumer preferences; in particular, every good orservice is produced up to the point where the last unit provides a marginalbenefit to consumers equal to the marginal cost of producing it.
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Monopolistic Competition (Definition) |
isa market structure in which barriers to entry are low and many firms compete byselling similar, but not identical, products.
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Marketing |
Allthe activities necessary for a firm to sell a product to a consumer.
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Brand Mangement |
The actions of a firm intended tomaintain the differentiation of a product over time.
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Oligopoly (Definition) |
a market structure in which a smallnumber of interdependent firms compete, will require completely different toolsto analyze.
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Barriers to Entry |
anything that keeps new firms from entering an industry in which firms areearning economic profits.
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Economies of Scale |
the situation when a firm’slong-run average costs fall as the firm increases output.
•This can make it difficult for newfirms to enter a market, because new firms usually have to start small, andwill hence have substantially higher average costs than established firms. |
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Patent |
The exclusive right to a productfor a period of 20 years from the date the patent is filed with the government.
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Government-Imposed Barriers |
•Governments might grant exclusiverights to some industry to one or a small number of firms.
•Examples: Occupational licensing for dentists and doctors Patents Tariffs and quotas imposed on foreigncompanies |
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Ownership of Key input |
•If control of a key input is heldby one or a small number of firms, it will be difficult for additional firms toenter.
•Examples: Alcoa—bauxite for aluminum production De Beers—diamonds Ocean Spray—cranberries |
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Game Theory |
Thestudy of how people make decisions in situations in which attaining their goalsdepends on their interactions with others;in economics, the study of the decisions of firms in industries where theprofits of a firm depend on its interactions with other firms.
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Duopoly |
Anoligopoly with two firms
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Dominant Strategy |
Astrategy that is the best for a firm, no matter what strategies other firms use
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Nash equilibrium |
asituation in which each firm chooses the best strategy, given the strategieschosen by the other firms.
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Collusion |
anagreement among firms to charge the same price or otherwise not to compete.
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Prisoner Dilemma |
agame in which pursuing dominant strategies results in noncooperation thatleaves everyone worse off.
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Price Leadership |
aform of implicit collusion in which one firm in an oligopoly announces a pricechange and the other firms in the industry match the change.
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Cartel |
isa group of firms that collude by agreeing to restrict output to increase pricesand profits.
Ex. OPEC |
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Monopoly |
isa market structure consisting of a firm that is the only seller of a good orservice that does not have a close substitute.Monopolyexists at the opposite end of the competition spectrum fromperfectcompetition.
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Copy Rights |
provide the exclusive right toproduce and sell creative works like books and films
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Public Franchise |
A government designation that afirm is the only legal provider of a good or service is known as a
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Network Externalities |
asa situation in which the usefulness of a product increases with the number ofconsumers who use it.
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Natural Monopoly |
occurswhen economies of scale are so large that one firm can supply the entire marketat a lower average total cost than can two or more firms.
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Market Power |
the ability of a firm to charge aprice greater than marginal cost.
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Anti-trust Laws |
aimed at eliminating collusion andpromoting competition among firms
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Sherman Act |
Prohibited“restraint of trade,” including price fixing and collusion. Also outlawed monopolization.
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Clayton Act |
Prohibitedfirms from buying stock in competitors and from having directors serve on theboards of competing firms.
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Federal Trade Commission Act |
Establishedthe Federal Trade Commission (FTC) to help administer antitrust laws.
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Robinson Patman Act |
Prohibitedfirms from charging buyers different prices if the result would reducecompetition.
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Cellar- Kefauver Act |
Toughenedrestrictions on mergers by prohibiting any mergers that would reducecompetition.
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Horizontal Mergers |
mergers between firms in the sameindustry
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Vertical Mergers |
betweentwo firms at different stages of the production process.
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derived Demand |
likethe demand for other factors of production, it depends on the demand for thegood the factor produces.
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Marginal Revenue product of Labor (MRP) |
MRP=PxMP so itcalculates the change in its revenue from hiring an additional worker |
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compensatingdifferential
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ahigher wage that compensates workers for unpleasant aspects of a job.
Example:Dynamite factory vs. semiconductor factory |
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Economic Discrimination |
Payinga person a lower wage or excluding a person from an occupation on the basis ofan irrelevant characteristic like race or gender.
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Labor Unions |
areorganizationsof employees that have a legal right to bargain with employers about wages andworking conditions.
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Personnel Economics |
The application of economicanalysis to human resource issues at firms is known as
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Monospony |
A market with a single buyerof a factor of production is known as a
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marginal productivity theory of income distribution
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it implies that the key to receiving more income is to control access to more, and more valuable, factors of production—including your own labor, of course.
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Law of Demand |
Therulethat, holding everything else constant, when the price of a product falls, thequantity demanded of the product will increase, and when the price of a productrises, the quantity demanded of the product will decrease.
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Law of Supply |
The rulethat, holding everything else constant, increases in price cause increases inthe quantity supplied, and decreases in price cause decreases in the quantitysupplied.
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Explicit Cost |
A cost that involves spending money |
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Implicit Cost |
A non-monetary opportunity cost |
