Card Set Information
How to find profit using PMP and PMQ?
1) find PMP and PMQ ALONG THE DEMAND LINE (where price x quantity is at its best; this is the TOTAL REVENUE)
2) then find where Marginal Revenue and Marginal Cost intersect
3) Find the average cost at the current quantity (along the Average Cost line) and multiply the 2 numbers that meet at that point; this is the TOTAL COST
4) TR - TC = profit
a market in which a single firm sells a product that does not have any close substitutes
the ability of a firm to affect the price of its product
barrier to entry:
something that prevents firms from entering a profitable market
the exclusive right to sell a new good for some period of time
the value of a product to a consumer increases with the number of other consumers who use it
a market in which the economies of scale in productin are so large that only a single large firm can earn a profit
deadweight loss from monopoly:
a measure of the inefficiency from monopoly; equal to the decrease in the market surplus
the process of using public policy to gain economic profit
the practice of selling a good at different prices to different consumers
a market severd by many firms that sell slightly different products
the process used by firms to distinguish their products from the products of competing firms
a market severd by a few firms
the study of decision making in strategic situations
the percentage of the market output produced by the largest firms.
a market with two firms
a group of firms that act in unison coodinating their price and quantity decisions
an arrangement in which firms conspire to fix prices
a graphical representation of the consequences of different actions in a strategic setting
an action that is the best choice for a player no matter what the other player does
a situation where both firms in a market would be better off if both chose the high price, but each chooses the lower price
an outcome of a game in which eah player is doingg the best he or she can, given the action of the other players
a promice to match a lower price of a competetor
a stragety where a firm responds to underpricing by choosing a price so low that each firm makes zero economic profit
a strategy where one firm chooses whatever price the other firm chose in the preceeding period
a system under which one firm in an oligopoly takes the lead in setting prices
kinked demand curve model:
a model in which firms in a oligopoly match rpice cuts by other firms, but do not match price hikes
a matrix or table that shows, for each possible outcome of a game, the consequences for each player
the strategy of reducing the price to deter entry
the price that just low enough to deter entry
a maket with low entry and exit costs
an arrangement under which the owners of several companies transfer their decision-making power to a small group of trustees
a process in which two or more firms combine their operations
a business practice under which a business requres a consumer of one product to purchase another product
a firm sells a product at a price below its production cost to drive a rival out of business and then increases the price
Does an Oligopoly have barriers to entry?
Cartels conspire to:
charge monopoly price
even though both firms would be better off without spending money on ads, they still do it.
How to do a concentration ratio using market powers?
add the market shares of the top (number) firms asked
Low price guarantees in a duopolies creates:
an informal cartel where both firms pick the high price.
The Act which made it illegal to engage in practices that resulted in the restraint of trade was the:
The government is likely to block a merger if:
it can be established that the merger would substantially reduce competition.