Studied by 1 person
Characteristics of perfect competition
large number of firms
all firms produce homogenous goods
free entry and exit
perfect information.
Types of profits in SR PC
economic profit
economic losses
break even
shut down price
loss making firms
profit maximising
MR=MC
Profits in LR PC
always end up at break even, due to barriers to entry being low shifting the supply shifting the price
allocative efficiency in PC
in SR and LR, and MC=P=MR
Productive efficiency in SR
always in LR and SR at break even
characteristics of a Monopoly
Dominant firms, or single seller
high barriers to entry
no close substitutes
types of barriers to entry Monopoly
economies of scale, branding, harsh advertising, legal barriers
Types of profits in Monopoly
profit, losses, break even
Revenue maximising firm in Monopoly
MR=0
Profit maximising firm in monopoly
MR=MC
allocative efficiency in monopoly
MC=P=AR
Productive efficiency in monopoly
Min ATC=MC
Oligopoly characteristics
high barriers to entry
small number of large firms
interdependence
interdependence in Oligopoly
decision of ones firm affects that of another and they take this into consideration when making decisions
game theory and oligopoly
explains the Nash equilibrium and interdependence of oligopoly, and how both will end up worse off in price wars, due to incentives to cheat
competition in oligopoly
Price competition: price wars which they try to avoid
non price competition
types of oligopolies
collusive
non collusive
Collusive oligopoly
oligopoly that has agreed to collude in contract of agreement, in which competition is limited by; fixing prices, keep at certain price, or raising price by same amounts
what’s another name for a collusive oligopoly
cartel; formal agreement to limit competition and increase profits —> act as monopoly
why is it difficult to keep an maintain cartel/collusion
incentives to cheat
different costs mean can agree to different price
number of firms in cartel—> more difficult to agree on price
possibility of price wars
non collusive oligopoly
each firm behaves independently but still considers each other actions
concentration ratio
percentage of output produced by the given number of largest firms in a given industry
Characteristics on monopolistic competition
large number of firms
no barriers to entry
product differentiation
types of product differentiation
location
services
quality
product image
what is the demand curve of monopolistic competition
slightly more elastic than that of monopoly
what is monopolistic competition all about
all about convincing consumer that their product I better—> establish a monopoly for their products
types of competition in monopolistic competition
non price competition
price competition
non price competition in monopolistic competition
branding
product differentiation
advertising
with this can increase prices whilst still maintaining customers
profits in LR for monopolistic competition
always end up at break even same as perfect competition due to low barriers to entry
allocative efficiency in monopolistic competition
P=MC=AR
Productive efficiency in monopolistic competition
MC at min ATC
Note 
Flashcard (175)