Perfect Competition
Your firm is currently incurring an economic loss, but will not shut down. If your firm is in perfect competition, an economist will say that you are currently producing at a price and quantity between these two curves.
Where is "between ATC and AVC"?
(TERM 5: Costs- FC, VC, TC, ATC, AVC, AFC, MC)
Robert currently has a monopoly on the highlighter market. He has technological superiority, is exhibiting economies of scale, has control on all the highlighter ink factories, and a patent on his special type of highlighter, leading to this for all the other firms trying to enter his market.
What are barriers to entry?
(TERM 18: barriers to entry)
This market characteristic recognizes the competition among firms in markets such oligopolies and monopolistic competition, but also notes that product differentiation, advertising, and branding can cause people to prefer one firm over the other. No one firm has a monopoly, but producers nonetheless realize that they can affect market prices.
What is imperfect competition?
(TERM 23: imperfect competition )
There is a giant food court at the mall, filled with many restaurants. Every restaurant is sort of different in it’s own way, one serving pizza, one serving Chinese Food, etc. While all of these restaurants are competing in the same market, all of the owners have a little bit of this to make their prices.
What is market power?
(TERM 17: market power)
Bobby's textbook market is currently in perfect competition. His total cost for the 5 textbooks he produces is $30. If the market charges $6 for a textbook, an economist can say his market has reached this point.
What is the break-even point?
(TERM 14: break-even price)
Matt has a monopoly on the market for computers. If he is exhibiting economies of scale throughout his entire production process, one may use this term to describe his firm.
What is a natural monopoly?
(TERM 19: natural monopoly)
In the cell phone service market, assume T Mobile is the most dominant firm. T Mobile raises it’s prices, and soon enough, Cricket Wireless and Boost Mobile follow suit. T Mobile is currently exhibiting this on the market.
What is price leadership?
(TERM 38: price leadership)
Steve's bagel market is currently in monopolistic competition. Monopolistically competitive markets are said to have low barriers to entry, meaning in the long run, depending on a profit or loss, this will occur until the firm breaks even.
What is "free exit and entry"?
(TERM 8: free exit and entry)
Marcus is running a booth in a farmers market. He is currently producing at a level of output and price where his average total cost is X, his minimum average variable cost, marginal revenue, and marginal cost are all Y. Marcus is currently producing at this point.
What is shutdown point?
(TERM 11: Shutdown price)
James and his grandmother went to Laura’s, which has the monopoly on movie theaters. The place charges James $5 for a ticket, while his grandma only pays $3. An economist would say Laura’s is exhibiting this on it’s clients.
What is price discrimination?
(TERM 20: price discrimination)
Kevin wants to buy a soda. He goes to the store and sees that there are two suppliers for soda, Pepsico. And Cola. However, a few years later, Pepsi and Coca announced that they were going form an alliance and act as a monopoly to raise each other’s profits. Kevin, still an economist can say that Pepsi and Cola are engaging in this.
What is collusion?
(TERM 25: collusion)
Laura runs a pizza parlor in Stamford. She chooses to locate it near Westhill to cater to the high school crowd, prides her restaurant for being the only deep dish pizza place in the area, and is known for advertising her special Laura Pizza, which has a special topping that no other restaurant has. An economist may say Laura’s pizza parlor is engaging in this to set her pizza place aside from everyone else.
What is product differentiation?
(TERM 37: product differentiation)
Stacy runs a perfectly competitive potato market in Idaho. She prices her potatoes where the market's supply meets it's demand. An economist may use this term to categorize Stacy.
What is a price taker?
(TERM 6: price taker)
In particular, most local utilities like electricity, telephone service, natural gas, and so on are covered by this, which is usually imposed by the government and limits the prices they can charge.
What is price regulation?
(TERM 21: price regulation)
Kevin wants to buy a soda. He goes to the store and sees that there are two suppliers for soda, Pepsico. And Cola. However, a few years later, Pepsi and Coca announced that they were going form an alliance and act as a monopoly to raise each other’s profits. The government may implement one of these to try and prevent this from happening.
What is an antitrust policy?
(TERM 35: anti trust policy)
The typical vendor in a food court isn't big enough to take maximum advantage of cost savings. It’s costs not being minimized is an example of this for the vendor.
What is excess capacity?
(TERM 40: excess capacity)
A firm is currently following the optimal output rule, and is following the price and quantity where profits are maximized. One can say that these two curves will meet.
What are MR and MC?
(TERM#10: optimal output rule MR=MC)
If Harry’s monopoly on the board game market is exhibiting production in this range, he is increasing output temporarily and decreasing his average total cost. Going into this range in long run may also lead to Harry’s firm being a natural monopoly?
What are economies of scale?
(TERM 4: economies of scale)
Oligopolies are characterized by being in a situation of this. For example, if Kevin’s shop and Susan’s shop are the two dominant firms in a market, Kevin’s decisions may affect Susan’s profits.
What is interdependence?
(TERM 27: interdependence)
Karen recently opened a hair salon and is making good money initially. However, due to changing prices and customers, her demand curve ends up being tangent to her ATC, and Karen is just breaking even at this point. An economist may say that Karen is at the point of _____.
What is zero-profit equilibrium?
(TERM 41: zero-profit equilibrium)