econ final
4 categories of resources are used to produce goods and services
-capital -land -entrepreneurial ability -labor
when deciding how many workers to employ
a firm tends to emphasize marginal revenue product
marginal resource cost
additional cost incurred as a result of utilizing one more unit of a variable resource is..
marginal product
additional output produced as a result of utilizing one more unit of a variable resource
Demand for a monopolistically competitive firm is more elastic than demand faced by monopoly becuase
availability of close substitutes
in a monopolistically competitive market...
consumers can find exactly what they are looking for based on their preferences and budgets
a firm will purchase a resource if the benefit associated with the purchase is...
greater than or equal to its cost
a monopolistically competitive firm should produce output until
marginal revenue = marginal cost
demand & average revenue & marginal revenue curves for a perfectly competitive firm are the same horizontal line at:
market price
elasticity for demand of products
more substitutes there are for a product
monopoly
no substitutes and entering market would be difficult for anyone
entry barriers are present in an
oligopolistic markets
four-firm concentration ratio
percent of sales by 4 largest firms in particular industry
the market share
percent of total market sales accruing to one specific firm
total revenue=
price times quantity
perfectly competitive model is most efficient type of market & characterized by both
productive & allocative efficiency
marginal revenue product=
change in total revenue/ change in resource quantity
perfect competition
market structure characterized by a large number of buyers/sellers. sellers produce a homogeneous product
monopolistic competition
market structure characterized by relatively large number of sellers producing a diff product that they have control over the price they charge. In a market w relatively easy market entry & exit known as
when an industry's CR4 exceeds 40%, it's considered
oligopoly
monopoly
perfect price discrimination generates the best outcome for what?
monopoly
perfect price discrimination generates the best outcome for which of following market structures
block pricing
second degree price discrimination is aka
market share
% of total market sales accruing to one specific firm
market share refers to:
% of total market sales accruing to one specific firm
profit=
(P-ATC) x Q
for a perfectly competitive firm, the market price is equal
-average revenue -marginal revenue -demand
what are the choices firms have when dealing with higher resource costs?
-deduct more from employees paychecks to pay higher costs -lower wages to compensate for additional expense -pay additional cost, which shifts marginal resource cost curve up
characteristics of oligopoly competitive market:
-few large products -producers who behave strategically when making decisions related to features, prices, advertising -producers who are price makers -operation in industries with extensive barriers -standard or different products
pure monopoly extracts all surplus from consumers, yielding higher profits than any other pricing method when it employs the following?
-first degree price discrimination -personal pricing -perfect price discrimination
4 characteristics of perfectly competitive market
-large number of buyers/ sellers -easy entry/ exit -standardized product -producers who are price takers
when there is productive efficiency
-output is produced using the fewest resources possible to produce a good or a service -output is produced at the lowest possible total cost per unit of production
2 most common numerical indicators of market concentration
-the herfindahl-hirscham index -four-firm concentration ratio
in a perfectly competitive market , homogeneity means that firms must charge the market price for the goods/ services they produce bc
-there are hundreds of other perfectly good substitutes -the market is competitive
by charging consumers the highest price they are willing & able to pay the pure monopoly:
-yields higher profits than any other pricing method available to the firm -extracts all surplus from consumers
in the Herfindahl-Hirschman index when #s are expressed 0 to 10,000, what number is a pure monopoly?
10,000
first degree price discrimination
Practice of charging each customer the price they are willing & able to pay for a good/service
in the circular flow model, what interacts in the resource market and the product market?
firms & households
marginal product times the price
firms operating in perfectly competitive markets, if the price of a product is constant, the marginal revenue is equal to
cartel
a group competing companies that aim to maximize joint profits by coordinating their policies to fix prices, manipulate output, or restrict competition
what is collusion?
a situation when decision makers coordinate their actions to achieve a desired outcome
potential reason diseconomies of scale to exist is that a firm
can't perfectly replicate its production when it expands
monopolistically competitive markets
combine characteristics of competitive markets & pure monopolies
Herfindahl-Hirschman Index
concentration index that measures the sum of the squared percentage of sales from all firms in a particular industry
diseconomies of scale
condition when the long run average total cost of production increases as production increases
perfectly competitive market involves firms that produce identical products. This guarantees:
consumers receive lowest price
in a monopolistic competitive market
consumers usually find what they are looking for based on preferences and budgets
an employees wage is tied to productivity... the higher the marginal revenue product should result in...
higher wage for that employee
if rate is constant, marginal resource cost associated with hiring 1 additional worker is...
horizontal line at wage
result of output produced when D=MC which is allocatively efficient
in a pure monopoly the firm is willing to sell to anyone who is willing/able to pay the marginal cost of production
price discrimination
practice of selling the same good/ service to diff consumers at diff prices is called
monopolistic competition is a market characterized by:
relatively large number of sellers producing a differentiated product, they have some control of the price in market w relatively easy market entry & exit
marginal revenue product
represents additional revenue generated from using an additional unit of a resource
game theory
study of behavior of decision makers
in a monopolistically competitive markets what allows consumers to be more responsive to price changes?
the availability of close substitutes
marginal revenue
the extra revenue associated with the production and sale of one additional unit of output
the more productive an employee is...
the higher that employee's marginal revenue product will be
bc monopolistic competitive firms face downward sloping demand curve..
the marginal revenue curve lies below the demand curve
the demand curve become the marginal revenue curve when:
when a pure monopoly practices first degree price discrimination