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UNIT 11: RENT-SEEKING, PRICE-SETTING, AND MARKET DYNAMICS
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What is competitive equilibrium?
when buyers and sellers are both price-takers and markets clear
2
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What type of shocks does equilibrium price respond to?
exogenous shocks - changes outside the model
3
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What does a exogenous shift in supply or demand mean for the equilibrium?
it means that the price has to change for the market to reach a new equilibrium
4
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The market equilibrates through what type of behaviour and on what side of the market.
the market equilibrates through rent-seeking behaviour on the short side of the market in response to excess supply and demand
* aka market equilibration through rent-seeking
5
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Define Economic Rent.
income in excess of the next best alternative
6
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Describe Market organization. what does it determine?
* prices come from the interest of and relationships between buyers and sellers
* determines how these relationships influence prices
7
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What point on a graph does it show long run equilibrium?
P = MC = AC
8
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When is the number of firms exogenous and when is it endogenous?
* exogenous in the short run, fixed
* endogenous in the long run, determined by the model
9
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What happens to supply in the long run as more firms enter production?
supply is more elastic in the long run
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