Imperfect competition

few industries selling a product

Oligopolies are

- few buyers and sellers

- heterogeneous (differentiate) products

- Asymmetric information

- Barriers to entry and exit

- Large market shares

What are the characteristics of imperfect competition?

Monopoly

One firm supplies for the industry

Oligopoly

Where few firms supply for the industry/few numbers of sellers, each of which is large enough to have a hearty influence over price

Monopolistic competition

Many sellers in an industry with different products (all within one industry)

Constant

In imperfect competition, price is not...

Less than

In imperfect competition, marginal revenue is .... price

Downward sloping

In perfect competition, the demand curve was horizontal while the demand curve for imperfect competition is ....

Set prices

The firms themselves can ....

Drug cartels

What is an example of an imperfect competition

Price

In imperfect competition, the .... is not constant, it is higher

Marginal revenue

In imperfect competition, ..... does not equal price (is less than price) because firms have more market power

Average revenue

In imperfect competition, the .... Is the demand curve

Marginal cost

In imperfect competition, and especially in monopolies the .... curve upwards sloping and it similar to the supply curve

MR=MC

A firm regardless of the industry type produce where...

Quantity

On an imperfect graph, where MR intercepts with MC is going to be the ....

Because demand is willingness to pay and if they continue to increase it then they would start losing customers

In imperfect competition, they can jack up the prices (quantity) until it reaches the demand curve. Why?

Monopoly price

Where industries continue to raise prices until it reaches the demand curve. That point is called the....

Higher

In imperfect competition, the price is .... than it would be in perfect competition and that is bad (this is why we don't like monopolies)

Less

In imperfect competition, the quantity supplied is ... than it would be in perfect competition and that is bad (this is why we don't like monopolies)

Maximized

In perfect competition, both consumer and producer surplus is .....

Because they can jack up the prices and the consumers experience a loss.

In imperfect competition, producers receive more surplus than consumers. Why?

Willingness to pay (demand curve) minus the price (the smaller triangle on the graph)

How do you find the consumer surplus in imperfect competition?

monopolist

Producers would enjoy their presence as a .... more than they would as a perfectly competitive firm

Price minus willingness to pay (demand curve) (the bigger triangle on the graph)

What is producer surplus?

Deadweight loss

The foregone surplus due to market inefficiency

everything

In a perfectly competitive market, we don't have any dead weight loss because .... is enjoyed by either the consumer or producer

Dead weight loss

At these quantities, people say that they are not going to pay above that price, so they get priced out of the market and goes to no one. This is called the.....

Increased

Under imperfect competition, compared to perfect competition, producer surplus is .... (Producers enjoy being monopolists)

Decreased

Under imperfect competition, compared to perfect competition, consumer surplus is.... (Consumers dislike higher prices)

higher

Under imperfect competition, compared to perfect competition, dead weight loss is .... due to forgone gains in trade

Price times quantity

What is revenue?

Revenue minus costs

What is profit?

Total costs minus variable costs

How do you find fixed cost?

Restricted

In monopolies, entry of other firms is ... (legal restrictions)

Pricing

Monopolies have absolute power over .... (Subject to demand restrictions)

Economic profits

Monopolies can make .... In the long run because they can set prices arbitrary higher in the absence of competition

Sometimes

Can monopolies be favorable?

Natural monopolies

Monopolies that arise as a result of economies of scale (monopolies that exists due to economics at scale) (power/utility companies) exits because companies get large and can leverage their economies of scale

Economies of scale

.... exists when increasing production leads to a lower average total cost

power/utilities

These large firms can produce ... at a relatively low costs due to their size

We regulate these monopolies

Why would we want large firms to run/produce power to the whole town?

Governments (federal, state, county, etc)

..... all negotiate with monopolies to ensure they charge a competitive price

Legal monopolies

Exists due to a government mandate (patents for pharmaceutical innovations) The government creates them

Non-price competition

When oligopolies do all the ways of competing and enticing customers without changing prices ex: advertising

Price cuts

In oligopolies, they match ...., but price increases

Cuts prices too

In oligopolies, if one of them cuts prices then the other should....

differ

Degrees of elasticity ... between each type of industry

1) Monopolistic, 2) Oligopoly, 3) Monopolistic competitive, 4) Perfect competition

What is the most inelastic to the most elastic?

Substitution

Why does the elasticity differ?

Calculate total revenue (price X quantity) then calculate total costs (ATC X quantity) then subtract them

How do you calculate the producer surplus/profit for a maximizing monopolist?

ATC

In imperfect competition, MC =

By looking at where the firm is maximizing the most

How do you find the Total revenue?

60%

A high four-firm concentration ratio, typically above …., suggests that a large proportion of the market share is dominated by the top four firms, indicating an oligopolistic market

Above the MR curve

The demand curve for a monopoly is?

Monopolistic competitive industry

A firm maximizes profits when MR = MC yet P > MC