Production Choices
What is the economic profit equation?
Total revenue - (Explicit + Implicit Costs)
Provide one example of social costs
Water/Air/Noise pollution
Traffic congestion
Negative health outcomes
Natural resource depletion
What are the 2 goals of the firm?
1. Create profit
2. Create the goods and services that society needs
Which market structure is characterized by having only one large firm?
Monopoly
What did Ms. L do her undergrad in?
Communication, Media and Film
What does GDP do?
Gives an overall view of productivity of countries
Why is collusion hard to detect?
It's secretive
OR
It mirrors normal business competition
List 3 variable costs
Commission, credit card fees, utilities, product packaging, maintenance
Which market structure is most likely to give rise to collusion?
Oligopoly
What did Ms. G do her undergrad in?
Math
Give the definition for capital-intensive production
Machinery dominates the production process (seen in the factory system)
Describe what it means for social efficiency to be achieved?
Social efficiency is achieved when social costs are considered in production decisions
List 3 fixed costs
Property tax, rent, insurance, loan payments, security
Which market structure is characterized by having high product differentiation?
Monopolistic Competition
What is Ms. G's favourite cuisine?
Mexican
Give an example of an opportunity cost in your life. Explain.
Ex. going to the movies with your friend rather than going to work
Name 3 forms of collusive behaviour (i.e. things colluding firms might do).
1. Price-fixing
2. Restriction of supply
3. Sharing insider info
When are profits maximized?
When marginal revenue = marginal cost
Identify 3 barriers to entry in a market.
High startup costs
Loyalty to established brands
Access to distribution channels (existing firms have exclusive relationship)
Strategic actions by existing firms (aggressive pricing, product innovation)
Government regulations
Patents/Copyright
Natural Monopolies (e.g. utility companies)
What is Ms. L's favourite food?
Sushi
A firm has a positive accounting profit, but negative economic profit. Financial standpoint: should they stay open?
Close. The economic profit shows they could be making more money doing something else.
Which governing body investigates collusion and what is one method they use?
Competition Bureau investigates
Immunity/leniency given to firms who come forward and reveal schemes
What is the theory of the firm used for?
To understand how firms make decisions by analyzing the difference between profits, revenues, and costs
Name all 5 factors that determine market structure.
1. Number and size of firms
2. Degree of product similarity
3. Control over price
4. Ease of entry
5. Amount of non-price competition
Pronounce both of our last names correctly (one chance only)
Lip - chin - ski
Jur - de - vick