Ag Econ Exam 3

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perfect

mr/mc for the _____ competitor

<p>mr/mc for the _____ competitor</p>
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firms?; small town businesses; no fee for entry

monopolist

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monopoly power is lasting and won't go away

monopoly vs. "monopoly power"

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monopolist

knowt flashcard image
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competitor

knowt flashcard image
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outputs

monopolist restrict

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perfect competition

most monopolistic company

  • many buyers and sellers -ID products

  • no barriers to entry

  • perfect info

  • free entry/exit (no market power)

  • no long run economic power

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oligopoly

middle monopolistic company

  • few firms (sellers)

  • no barriers

  • perfect info

  • free entry/exit

  • market power

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monopoly

least monopolistic company

  • one seller -barriers to entry

  • market power

  • long rune economic profit

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product differentiation

  • making a product "different"

  • no matter what's on the can, all beer tastes the same. ex/ advil vs ibuphrofen ex/ lays (more uniform chips than off brand)

<ul><li><p>making a product &quot;different&quot;</p></li><li><p>no matter what&apos;s on the can, all beer tastes the same. ex/ advil vs ibuphrofen ex/ lays (more uniform chips than off brand)</p></li></ul>
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oligopoly

  • few firms

  • interdependence (dependent on actions of others)

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5

How many models of oligopoly's are there?

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kinked demand curve model

  • For products in this market, price stays the same as it’s the sole (or only significant) determinant of demand.

  • model of oligopoly

<ul><li><p>For products in this market, price stays the same as it’s the sole (or only significant) determinant of demand.</p></li><li><p>model of oligopoly</p></li></ul>
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salop's line

  • If you go to the beach and set up a refreshment stand in the middle, it minimizes the beachgoer’s implicit cost of buying stuff from you (in this case, the distance traveled)

  • The next day, a stand pops up directly next to you in order to segment your market, rinse and repeat.

  • model of oligopoly

<ul><li><p>If you go to the beach and set up a refreshment stand in the middle, it minimizes the beachgoer’s implicit cost of buying stuff from you (in this case, the distance traveled)</p></li><li><p>The next day, a stand pops up directly next to you in order to segment your market, rinse and repeat.</p></li><li><p>model of oligopoly</p></li></ul>
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Cournot-Nash

  • As the number of firms increases, market production will gradually approach equilibrium

  • model of oligopoly

  • "n" firms

<ul><li><p>As the number of firms increases, market production will gradually approach equilibrium</p></li><li><p>model of oligopoly</p></li><li><p>&quot;n&quot; firms</p></li></ul>
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stackelberg

  • leader/follower dichotomy

  • the leader is the firm with the lower marginal cost

  • model of oligopoly

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market failure

  • anytime market efficiency is hindered

  • persistant shortages or surpluses

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externality

when SOMEONE ELSE is effected in a market --> a "third party"

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4 types of externalities

positive and negative production positive and negative consumption

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economic impact or apple farmer with his orchard set up near a beekeeper.

example of positive production externality

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pollution or mining coal has been linked to adverse health effects, same with burning it.

example of negative production externality

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higher education

example of positive consumption externality

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ryan and his egg salad sandwich or Fertilizer used to produce crops leaches into groundwater, pesticide use has been linked to public health issues

example of negative consumption externality

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private and club goods

government does not need to provide these

<p>government does not need to provide these</p>
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public resources and public goods

government enforces these

<p>government enforces these</p>
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tragedy of the commons

  • public resource

  • no personal incentive to reserve resources

  • theory that individuals tend to exploit communal resources ex/ overgrazing

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private, club, public resources, and public goods

what are the 4 types of goods?

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short run agrigate supply (SRAS)

supply of everything for everyone

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agrigate demand (AD)

demand of everything for everyone

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inflation

average level of prices rising

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demand pull inflation

  • increase in demand for everyone

  • (kind of good)

<ul><li><p>increase in demand for everyone</p></li><li><p>(kind of good)</p></li></ul>
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cost push inflation (supply shock)

  • (bad inflation)

<ul><li><p>(bad inflation)</p></li></ul>
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rule of 72

  • time to double = 72 (inflation/interest rates)

  • if you notice inflation, it is a problem

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command interest formula

fu = pu x (lti)^n fu - future pu - present lti - interest n - years

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bertrand

competitors who can only compete with price

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game theory

  • study of interdependence

  • (meaning of interdependence: the dependence of two or more people or things on each other)

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price floors/ceilings

  • a minimum (or maximum) cap on a good

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example of an (extreme) price ceiling

-rent control-If the “ceiling” is below the actual market equilibrium, it will affect the market.

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example of a price floor

  • minimum wage

  • if this is "binding" then the "floor" is a price over the market equilibrium

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consumption externalities

  • when consuming a commodity affects an unknown third party

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negative consumption externality

when consuming a commodity HARMS the third party

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positive consumption externality

when consuming a commodity BENEFITS the third party

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private benefit/private cost

what's weighed by the decision maker

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consumption externalities

when consuming a commodity affects an unknown third party

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production externalities

when producing a commodity affects an unknown third party

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negative production externality

when producing a commodity HARMS the third party

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positive production externality

when producing a commodity BENEFITS the third party

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subsidy

direct payment to someone for consuming or producing a particular commodity ex: scholarships/financial aid ex: out of state tuition is the FULL cost of letting you attend school for a year, in-state tuition is that MINUS the subsidy.

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free rider problem

arises when individuals are allowed to consumer more of public goods than their fair share

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