perfect
mr/mc for the _____ competitor
firms?; small town businesses; no fee for entry
monopolist
monopoly power is lasting and won't go away
monopoly vs. "monopoly power"
monopolist
competitor
outputs
monopolist restrict
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
oligopoly
middle monopolistic company
few firms (sellers)
no barriers
perfect info
free entry/exit
market power
monopoly
least monopolistic company
one seller -barriers to entry
market power
long rune economic profit
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)
oligopoly
few firms
interdependence (dependent on actions of others)
5
How many models of oligopoly's are there?
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
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
Cournot-Nash
As the number of firms increases, market production will gradually approach equilibrium
model of oligopoly
"n" firms
stackelberg
leader/follower dichotomy
the leader is the firm with the lower marginal cost
model of oligopoly
market failure
anytime market efficiency is hindered
persistant shortages or surpluses
externality
when SOMEONE ELSE is effected in a market --> a "third party"
4 types of externalities
positive and negative production positive and negative consumption
economic impact or apple farmer with his orchard set up near a beekeeper.
example of positive production externality
pollution or mining coal has been linked to adverse health effects, same with burning it.
example of negative production externality
higher education
example of positive consumption externality
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
private and club goods
government does not need to provide these
public resources and public goods
government enforces these
tragedy of the commons
public resource
no personal incentive to reserve resources
theory that individuals tend to exploit communal resources ex/ overgrazing
private, club, public resources, and public goods
what are the 4 types of goods?
short run agrigate supply (SRAS)
supply of everything for everyone
agrigate demand (AD)
demand of everything for everyone
inflation
average level of prices rising
demand pull inflation
increase in demand for everyone
(kind of good)
cost push inflation (supply shock)
(bad inflation)
rule of 72
time to double = 72 (inflation/interest rates)
if you notice inflation, it is a problem
command interest formula
fu = pu x (lti)^n fu - future pu - present lti - interest n - years
bertrand
competitors who can only compete with price
game theory
study of interdependence
(meaning of interdependence: the dependence of two or more people or things on each other)
price floors/ceilings
a minimum (or maximum) cap on a good
example of an (extreme) price ceiling
-rent control-If the “ceiling” is below the actual market equilibrium, it will affect the market.
example of a price floor
minimum wage
if this is "binding" then the "floor" is a price over the market equilibrium
consumption externalities
when consuming a commodity affects an unknown third party
negative consumption externality
when consuming a commodity HARMS the third party
positive consumption externality
when consuming a commodity BENEFITS the third party
private benefit/private cost
what's weighed by the decision maker
consumption externalities
when consuming a commodity affects an unknown third party
production externalities
when producing a commodity affects an unknown third party
negative production externality
when producing a commodity HARMS the third party
positive production externality
when producing a commodity BENEFITS the third party
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.
free rider problem
arises when individuals are allowed to consumer more of public goods than their fair share
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