Reading...
Play button
Play button
Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
17 Cards in this Set
- Front
- Back
|
What are 4 characteristics of Monopolistic Competition?
|
1) Large Number of Sellers
2) Easy Entry & Exit 3) Nonprice Competition 4) Only earns Normal Profit in Long Run |
|
|
Monopolistic Competitor maximizes profit or minimizes loss where:
|
MR = MC
|
|
|
What are two kinds of oligopoly?
|
Homogeneous (Selling steel, copper, cement, etc)
Differentiated (Appliances, Cars, Breakfast Cereals, etc) |
|
|
Oligopolies are price --?
|
Makers though each oligopolists must react to rivals' reactions to changes in price, output, advertising strats, etc.
|
|
|
Oligopoly control over price?
|
Limited by mutual interdependence tho collusion is possible
|
|
|
Oligopoly Barriers of Entry?
|
Significant obstacles in Growing Your Firm to Compete
|
|
|
Herfindahl index?
|
Measure of Concentration and competitiveness of an industry; Calculated as Sum of Squared Percentage Market Shares of individual firms in industry
|
|
|
The larger the Herfindahl index, --?
|
The greater the degree of market power in the industry
|
|
|
Why is the Herfandahl index so small in a purely competitive industry?
|
So many firms each have so little market power that when it is squared nearly approaches zero.
|
|
|
Kinked-Demand Curve Graph:
|
· Top segment (Elastic): Rivals ignore price increase above equilibirum
· Bottom more Steep Segment (Inelastic): Rivals match Price Decrease · At equilibrium, MR is split btwn Top Segment's MR and Bottom Segment's MR [Connect vetically via dotted line] |
|
|
Shifts in MC curve in Kinked-Demand Graph?
|
Up or Down causes no change in Price but does increase/decrease total profits
|
|
|
Oligopoly Profit-Maximizing Price?
|
Where "Kink"'s Quantity hits the Demand Curve
|
|
|
What are 6 obstacles to collusion?
|
1) Demand and Cost Differences (Disagreements on Profit-Maximizing Price)
2) Number of Firms (Large the Number, Harder it is to control a significant portion of the market) 3) Cheating (Game-Theory Model) 4) Recession (Avoid Profit Reduction by cutting price and gaining ACTUAL sales) 5) Potential Entry 6) Legal Obstacles: Antitrust Law |
|
|
Price leadership?
|
Oligopolies Coordinate prices w/o outright collusion based on formal agreements or secret meetings.
· "Dominant Firm" initiates Price changes and others follow suit |
|
|
Price War?
|
Successive and continuous price cuts by rivals as they attempt to maintain their market shares
|
|
|
Most comprehensive Form of Collusion?
|
Cartel- Formal Written Agreement specifying how each member will produce and charge
|
|
|
Tacit understandings?
|
Made on golf courses, meetings, parties in verbal agreements
|
