Cost, Profit & Revenue Theory
The rise in product for one additional unit of input factor.
What is Marginal Product
Because in the long run, the lack of barriers to entry will allow new competitors to enter and drive down the market price.
Why does the PCM only make normal profit in the long run?
Natural monopoly with government help
The 4 largest firms have 50% of total market sales
What is a concentration ratio which does not prove the market structure is an oligopoly?
The period of time wherein at least one factor of production is fixed.
When they are unable to cover their minimum average variable costs.
When would a PCM firm shutdown and leave the market?
MC=MR
Where is the profit-maximising level of output?
What are some examples of economies of scale?
When a formal agreement is made on the price or quantity of the good
What is open collusion/cartel?
Sales maximisation; revenue maximisation; Survival or Profit satisficing
What alternative goals could firms pursue other than profit-maximisation?
P = ATCmin
At what point is output productively efficient?
greater consumer variety
What is one advantage of an MC firm over a PCM firm?
Fines
What does the Monopolist face if it engages in any behaviour which would be considered an abuse of monopoly power?
Which describes the outcome which optimises the welfare of both players involved?
The process by which in the short run the existence of a fixed input reduces the productivity of each added variable input until a point is reached after which total output falls.
What does the law of diminishing marginal returns describe?
Neither allocatively or productively efficient in either SR or LR
What is the main disadvantage of the MC firm compared to the PCM firm?
The process whereby the monopolist attempts to out-compete rival firms and push them out of the market by drastically cutting prices.
What does predatory pricing describe?
The same as Monopoly
Which diagram is used to illustrated a Collusive Oligopoly?
Due to diseconomies of scale
The lack of innovation induced by competition.
What is a disadvantage of a PCM firm?
The changing elasticity of the individual firm's demand-curve
What signifies the level of market power a firm has/how many close substitutes there are for its good?
What is one often unappreciated benefit of having a monopoly on a demerit good such as Systembolaget and alcohol?
The Kinked Demand Curve
What illustrates, using elasticities and a broken MR curve, the characteristic typical of non-collusive oligopolies that prices will remain rigid/stable?