Cost, Revenue, Profit
What is the difference between “short-run” and “long-run”?
Some variables fixed vs. All factors are variables
Name two characteristics of a perfectly competitive market
1. There are many firms
2. Each firm has a small market share
3. Each firm has no ability to set the price
4. All sell an identical product
5. There is perfect information available to firms and consumers about prices and quality of goods
6. Firms can freely enter and exit the market
7. No economic profits in the long run
What is the main thing that separates monopolistic competition goods from perfect competition goods?
Differentiation of products (advertising)
How many firms are in a natural monopoly market?
One
What is the market structure called when there are only two large companies?
Duopoly
What is the difference between total cost and total variable cost?
Total fixed cost
What does MR. DARP stand for?
Marginal Revenue = Demand = Average Revenue = Price
How much control do Monopolistically competitive producers have over price?
Small amount of ability to change price, but still very elastic.
Why do monopoly markets exist?
Strong barriers to entry
What does it mean for a pure/perfect oligopoly to exist?
No differentiation of products
What is it called when a firm can only raise it's ATC by increasing it's factors of production?
Diseconomies of Scale
At what point will a perfectly competitive firm (or any firm) produce if they are profit maximizers?
When MR = MC
When a firm tries to increase brand-loyalty, what type of competition are they participating in?
Non-price competition
What does it mean to say one firm “dominates” the market?
50% or more market share
Why is the prisoner's dilemma relevant to studying oligopolies?
It shows why collusion is often attempted but often fails.
What is the rule that states that increasing variable factors of production, while at least one factor of production is fixed, will lead to decreasing marginal output?
The Law of Diminishing Marginal Returns
Is it likely for a perfectly competitive firm to earn profits in the long-term? Why or why not?
Unlikely - other firms will enter.
Are monopolistically competitive firms productively efficient?
No, because P is not at Minimum ATC
What would make a market a "pure" monopoly?
1 firm with 100% market share
What is another name for open or formal collusion?
Cartel
If a firm’s costs equal their revenue, what is this called?
Normal Profit or breaking-even
At what point will a firm leave a perfectly competitive market?
When P is below AVC
Draw a graph for a monopolistic competition firm making losses and clearly label the box that represents the loss.
(P-ATC)*Q
Draw a graph for a monopoly firm and identify the P and ATC at the revenue maximizing point.
MR=0, look up at ATC and D curves.
In market X, the 5-largest companies have the following market shares: 31%, 18%, 12%, 11%, 7%.
What is the four-firm concentration ratio?
72%