Cramming Doc

What is a cartel?

What is Nash equilibrium economics

• no player has anything to gain by changing only their own strategy while the other players keep theirs unchanged.

Mono comp firms are inefficient b/c

• produce w/ excess capacity

• fail to achieve productive efficiency

• incur a deadweight loss in production

• produce less and charge a higher price than perfect competitors

Monopolistically competitive (mono comp) firms produce with excess capacity because they have some degree of market power, which allows them to set prices above marginal costs.

• This occurs because mono comp firms offer differentiated products, leading consumers to perceive these products as unique.

• Consequently, firms tend to produce less than the efficient output level (where average total cost is minimized), resulting in excess capacity. Firms are not producing at their optimal scale, which leads to inefficiencies and higher average costs.

Collusion is impossible in Perf Comp and Mono Comp due to large number of firms