Studied by 8 people
unit test MC monday 11/20 FRQ tuesday 11/21
max profit quantity
MR = MC
allocative efficiency
D = MC/Supply
max revenue
MR = 0
natural monopoly
firm with high fixed costs, very little marginal cost
only efficient at high quantities (e.g. DTE)
price discrimination
a firm charges each buyer exactly what they are willing to pay; no dead weight loss or consumer surplus (e.g. financial aid)
monopolistic competition
many firms, each with its own version of the good
short run economic profit
long run- demand will shift until market is at $0 economic profit; when people don’t want to buy from them, they just go somewhere else
oligopoly
a few giant firms control the market
pretend to be in competition to make a profit
dominant strategy
optimal option when all potential outcomes are considered
monopoly
market with one firm; firm is the market
excess capacity
firm is not producing at efficiency
collusion
firms work together to discover their optimal strategy
oligopoly
a few giant firms control the market
game theory
utilizes the payoff matrix to analyze profits/optimal or dominant strategy
dominant strategy
a firm in an oligopoly will choose this option no matter what the other firm(s) choose to do
subsidy
government monetary support
downward sloping portion of ATC curve
increasing returns to scale
low point of ATC curve
efficient scale
upward sloping portion of ATC curve
decreasing returns to scale
efficient quantity
socially optimal
socially optimal
allocative efficiency
Note 
Flashcard (24)