Counting the Costs
This type of cost does not change as the quantity of output produced changes.
What is a Fixed Cost?
The individual firm in a perfectly competitive market is described by this two-word term because it has no control over the market price.
What is a Price Taker?
This is the universal rule for profit maximization used by a monopolist to determine its quantity.
What is Marginal Revenue equals Marginal Cost (MR = MC)?
This is the primary characteristic that distinguishes monopolistic competition from perfect competition.
What is Product Differentiation?
In game theory, this is a strategy that is best for a player regardless of what the other player chooses.
What is a Dominant Strategy?
The mathematical formula for calculating Marginal Cost (MC).
What is the Change in Total Cost divided by the Change in Quantity (ΔTC / ΔQ)?
For a firm in perfect competition, these four variables are all represented by the same horizontal line on a graph.
What are Marginal Revenue, Demand, Average Revenue, and Price (MR. DARP)?
ecause a monopolist must lower its price to sell more units, its Marginal Revenue curve is always located here relative to its Demand curve.
What is Below (or to the left)?
In the long run, a monopolistically competitive firm will earn this amount of economic profit.
What is Zero (or Normal) Profit?
A group of firms that formally agree to collude and act as a monopoly to keep prices high and output low.
What is a Cartel?
his curve always intersects the Average Total Cost (ATC) and Average Variable Cost (AVC) curves at their lowest points.
What is the Marginal Cost curve?
The "Price Taker" Mimic. To earn these points, you must sing any Taylor Swift song for the next 15 seconds.
Good Job!
This triangle-shaped area on a graph represents the loss of efficiency caused by a monopoly’s restricted output and high prices.
What is Deadweight Loss?
This term describes the gap between the output at which a firm’s ATC is minimized and the output at which it actually produces.
What is Excess Capacity?
The "Invisible Hand" Shuffle. To earn these points, you must stand up and perform a 5-second interpretive dance representing market forces pushing toward equilibrium.
Really? That?!?
In the long run, this category of cost no longer exists because all inputs can be adjusted.
What are Fixed Costs?
A firm should stop producing and "shut down" in the short run if the market price falls below this specific cost.
What is the Average Variable Cost (AVC)?
A type of monopoly that exists when a single firm can produce the entire market's output at a lower cost than two or more firms.
What is a Natural Monopoly?
Unlike perfect competition, monopolistically competitive firms often engage in this "non-price" activity to increase demand.
What is Advertising (or Branding/Marketing)?
This term describes the situation in which the profit of one firm depends on the pricing and output decisions of other firms in the market.
What is Mutual Interdependence?
This phenomenon occurs when long-run average total cost decreases as the scale of output increases.
What are Economies of Scale?
In the long run, a perfectly competitive firm will produce at a point that achieves both allocative efficiency and this other type of efficiency.
What is Productive Efficiency?
The practice of charging each consumer their maximum willingness to pay, which eliminates consumer surplus and deadweight loss.
What is Perfect Price Discrimination (or First-Degree Price Discrimination)?
Monopolistic competition is considered inefficient because, at the profit-maximizing quantity, price is greater than this value.
What is Marginal Cost (MC)?
This occurs when both players in a game have chosen their best strategy given the other player's choice, and neither has an incentive to deviate.
What is a Nash Equilibrium?