Econ(Micro) Midterm #2
Monopoly
1 Seller (most market power)
Oligopolisitc Market
Handful of large sellers
Inferior Goods
Increase price and consumption
Normal Goods
Increase price and reduce consumption
Giffen Goods
Inferior good where demand only increases
Which are sources of market failure
Market power, Externalities, Irrationality
A product market has only one seller, and that seller has a high level of market power. There are no close substitutes for the product. What type of market is this?
Monopoly
Which of the following is NOT a way that the government can intervene in markets
The government can stop the forces of demand and supply from working in markets
Mandate
a requirement to buy/sell a MINIMUM amount
Market failure occurs when market forces lead to
an inefficient outcome
Substitution Effect
change in the price
Income Effect
changed in quantity consumed
When the economic surplus in a market is less than it would be if the market were efficient, the market is experiencing
deadweight loss
A good example of monopolistic competition is the market for
fast food
A rent control usually sets a price ceiling that is below the equilibrium price and thus
generates shortage
Budget Constraint
how available resources are
An assumption of the model of perfect competition is
identical goods
Optimal Consumption Bundle
maximizes consumer total utility(makes consumer happy)
Which of these would illustrate a price floor
minimum wage
The profit-maximizing rule, MC = MR, is followed by firms operating in
monopolistic competition, monopoly, and perfect competition
From an economic perspective, the outcome that yields the greatest economic surplus is the
most efficient outcome
Market power leads to markets that do NOT have socially optimal results. The _____ is higher and the _____ is lower than the socially optimal result in perfect competition.
price; output
Oligopoly
small # of firms that produce the same good
Marginal Utility
the change in utility from consuming an additional unit. (how much you like stuff)