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At the socially optimum quantity of production price equals

Marginal cost

Suppose an oligopolistic firm assumes that it's rivals will ignore a price increase but match a price cut. in this case, the firm perceives its demand curve to be

Kinked being steeper below the going price then above

Given that there are significant economies of scale involved in making flatscreen televisions the cost of manufacturing a flat screen television set will most likely

Fall as the industry matures

If the marginal revenue of the next widget the firm produces is $50 and it's marginal cost is $35 a firm should

Increased production

Which of the following is one of the necessary conditions for perfect competition

Large number of firms

Into thousand nine Circuit City closed it's stores if we assume this was a short red decision then the most likely explanation for is that the price of a typical products sold at Circuit City stores was

Less than the average variable cost of producing the toy

As long as marginal cost is below marginal revenue a perfectly competitive firm should

Increase production

Which of the following is most likely an example of constant returns to scale

Widget manufacturing double its production by opening a new plant that was identical to its old plant

Which of the following is most likely to be an example of econoomies of scale

The per-unit costs on Excel publishing companies manuals fall because it adopted a new technology following a large order from the government

There are many restaurants in the city of really each one offering food and services that differ from those of its competitors there is also free entry of sellers into the market and each seller sears a very small fraction of the total number of meals served each day the restaurant industry in rally is best categorized as

Monopolistically competitive

Which of the following is most likely an example of diseconomies of scale

The XYZ Co. increase production capacity by 25% and experienced a 30% increase in its total cost

Although many legal music downloads site started up because of the technology only if you have survived it is likely that online music firms

Experience economies of scale

The demand for clothing increases as a result the price of clothing increases above the minimum average cost of producing it. In the long run if the clothing industry is perfectly competitive and is a constant cost industry

The supply of clothing will increase but the price will not

If a natural monopolist were forced to set price equal to average cost it would

earn a normal profit

The foregone income that the owner of the business could have made by spending time working in another job is called

Opportunity cost is a vast auction site that is similar to a competitive market in some ways but also differs from it and others. Which of the following best describes how eBay resembles a competitive market

There is a great variety of different products sold on eBay

Spam email is a major annoyance for many people who use the Internet. However spammers sometimes have to send thousands of messages to just get one response that pays any money. Given this information

Spamming can be profitable even with a very low number of buyers because the marginal cost of sending spam is virtually zero

Costs that are spent and cannot be changed in the period of time under consideration are called

Fixed costs

Variable costs:

Changes output changes

In the market for bank credit a large big sometimes announces a change in interest rates. After the changes in interest rates are announced other banks in the industry usually react by changing their rates in the same way this is an example of

implicit collusion

In the short run average variable cost equals

Average total cost less average fixed cost

Implicit and explicit revenues minus implicit and explicit cost equal

economic profit

If a firm in a perfectly competitive market experiences a technological breakthrough

Other firms would find out about it immediately

US pharmaceutical companies often sell drugs at a lower pricing for markets. Where demand is more price he lasted been in US markets. The main reason for this price discrimination is that the companies must charge high prices to some consumers in order to recover development costs. U.S. consumers end up paying

More because they have less price elastic demand

Be able to calculate fixed/variable/total costs

TC = VC + FC

Be able to calculate average fixed cost AFC


Be able to calculate average variable costs AVC


Be able to calculate average total cost ATC


Be able to calculate marginal costs MC

(TC1 - TC2)/(Q2-Q1)=MC

Why do companies merged and spinoff units with respect to their LR ATC's


What formulas used to determine profit maximizing out

MR equals MC

What formulas are used to determine the amount of profit or loss

TR minus TC

What is a perfectly competitive firm short run supply curve

MC is supply in short run

What formula determines if a firm will shut down in this market structure

If P is less than AVC

Are productive and/or allocative efficiency achieved with perfect competition? why or why not

Yes because what is needed is Produced and must be productive effiently because they couldn't compete otherwise

List the market characteristics of a perfectly competitive firm

Large numbers, Perfect elastic demand, free entry and exit, pricetakers

List the market characteristics of a purely Monopolistic firm

Single firm is the sole producer of a product with no substitutes.

Pure, not near, monopoly characteristics - single seller, No close substitutes, firm is a price maker, entry into the industry is blocked.

I monopolist may engage in nonprice competition examples are public utilities, professional sports.

What formula is used to determine profit maximizing output

MR equals MC

What formulas are used to determine the amount of profit or loss

Profit equals TR minus TC

What are three barriers to entry that create monopolies

Economies of scale - Public utilities, natural monopoly pieces okay if you regulated.

Legal barriers - patents, licenses, Companies and TV stations are examples

Ownership or control over essential resources - deBeers diamonds is an example of this so is pro sports,

monopolist use pricing or strategic carriers, Microsoft building Internet Explorer and have a package with computers.

What is monopoly rent seeking behavior

Pouring money back into politics to ensure/protect their monopoly. Lobbying, public relations.

What is an X inefficiency

Firms operating Far less efficiently than they could technically. No competitive pressure to produce at lowest cost. Firms costs are higher than needed.
PacBell is an example of this.

How does profit maximization differ between a single price monopolist and a price discriminating monopolist

When a monopolist price discriminate it charges individuals high up on the demand curve higher prices and those low on the demand curve lower prices. They can charge consumers with less elastic demand a higher price and individuals with Maury lasted demand a lower price. Movie prices airline fares, executive travelers, have inelastic demand, vacation travelers, have more elastic demand. Price discrimination make greater profit because they are able to charge more to Less elastic consumers. More profits Cambiaron by the seller, since the price charged is what each buyer is willing to pay in perfect discrimination. Thus, marginal revenue equals demand when price discriminating.

Why would a firm be a natural monopoly

Cheaper do have the one firm produce and makes it cheaper for the consumer

List the market characteristics of a monopolistic competitive firm

Many sellers, differentiated products, multiple dimensions of competition, easy entry for new firms in the long run.

What is product is differniation and how is it achieved and what does it allow producers to do?

Gives it it's monopolistic aspect. Monopolistic competitors have some monopoly power advertising to increase monopoly power makes sense as long as the marginal benefit of advertising exceeds the marginal cost. Firms must make their decisions as They had no effect on other firms. Multiple dimensions of competition.

Are productive and/or allocative efficiency achieved with perfect competition

In perfect competition both types of efficiency are achieved in the long run

List the market characteristics of an ologoplostic firm

Mutually interdependent, can be collusive or non-collusive, strategic decision making.

Describe the kinked demand curve model and what it tells about the equilibrium price and it's stickiness

Type of informal collusion. Informal collusion kinkos sticky prices. Another possible reason is that firms don't collude but have certain expectations of other firms. They see a kinked demand curve facing them. When the demand curve has a kink, the marginal revenue curve must have a gap.Increased price leads to decrease in quantity demanded.Demand curve below current price, it is less elastic, price decline would be matched by other competitors = little change in quantity demanded with a price decline. Price remains sticky benefiting all competitors.

What does strategic behavior, mutual interdependence, and game theory have to do with oligopolies pursuit of profits

They can act as a monopoly if they collude

What is collusion why does it happen

Implicit collusion, is multiple firms that make the same pricing decisions even though they have not explicitly consulted with one another.

What is the cartel model for oligopolies

A model that assumes that oligopolies act as if they were monopolists that have assigned output quotas to individual member firms of the oligopoly so that total output is consistent with joint profit maximization. Limit entry of other firms by forming a cartel

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