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30 Cards in this Set
- Front
- Back
What is a homogeneous product?
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little distinction from the competition, perceived to be identical by the consumer
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Perfect competition includes
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> many buyers and sellers
> standardized products > fully informed buyers and sellers > firms free to enter and exit market |
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Perfect competition can change only
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production. Price is set by market.
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Who sets prices in a perfect competition firm?
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the market sets the price. PC firms have no choice.
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Why are PC firms price takers and not price makers?
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many small firms with multiple substitutes
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How does the demand curve appear in a PC market?
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Horizontal, perfectly elastic
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How much product can a PC firm sell at market price?
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As much as they can produce
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Marginal revenue is
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the change in total revenue divided by the change in quantity
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In a PC firm, what is the equation P=AR=MR?
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Price, marginal revenue, and average revenue are all equal
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When is profit maximized?
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When MR=MC
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What is a monopoly?
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single seller of a product with no close substitute
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4 barriers monopolies put in place to discourage new firms
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patents
licensing economies of scale control over resources |
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What is a natural monopoly?
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one whose long run average cost declines as the firm increases output
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True or untrue? A monopoly can set their prices at anything they want
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untrue
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In both a MONO and a PC, to maximize profit
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increase production as long as MR > MC
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Describe a MONO short-run supply curve
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MONO does not have one
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Beside barring new competition, what else do MONO barriers provide for?
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They allow for long run profit earnings
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Graphically, what distinguishes a MONO from a PC?
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the slope of the demand curve
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MONO in term of production are
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inefficient producers
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Which firm, a MONO or a PC are able to produce less but charge a higher price?
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MONO, they are price setters and can reduce output levels
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What it a MONO Competitive firm?
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many firms selling a slightly different product
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Why is collusion rare in a MONO-C firm>
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too many firms
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Of MONO or MONO-C firms, which one produces heterogeneous products?
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MONO-C
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Are MONO-C price makers or price takers?
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Price makers
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Again, what do each MONO, PC, and MONO-C have in common in relation to max profits?
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at max profit, MC=MR
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In both MONO and MONO-C, the MR curve>
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lies below the demand curve
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A commonality between a PC and a MONO-C firm>
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both have zero long run economic profits
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What type of firms allow no barriers to entry
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both PC and MONO-C
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What is an oligopoly?
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a few interdependent firms
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What is an oligopoly with collusion?
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a cartel
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