micro eco final
Diffusion
Spread of innovation through imitation or copying
What is a cartel?
a group of firms that collude (OPEC)
examples of repeated games
coke and pepsi nike and Adidas Walmart and target
what are criticisms of the kinked demand curve
explains inflexibility not price price war
technological advance
new and better goods and services or new and better ways of producing or distributing them.
What is game theory?
the study of how people behave in strategic situations
how does government encourage invention?
through patents
three pricing models
1. kinked demand curve 2. collusive pricing 3. price leadership
what is the percent to be considered an oligopoly (concentration ratio)
40%
invention
A new product, system, or process based on scientific knowledge, patent protection
Are oligopolies efficient?
NO, productively because p> min ATC and allocatively p>MC
the term oligopoly indicates what?
a few firms producing either a differentiated or a homogenous product
what are characteristics of an oligopoly?
a few large producers homogenous or differentiated limited control over price strategic behavior mutual interdependence entry barriers and mergers
allocative efficiency
a more preferred mix of goods and services
in the short run, a profit maximizing monopolistically competitive firm sets its price :
above MC
nonprime completion refers to what?
advertising, product promotion, and changes in the real or perceived characteristics of a product
What is an example of an oligopoly in the U.S
aluminum industry, three huge firms dominate an entire national market
modern view of technological advance
capitalism is the driving force profit is incentive internal capitalism
what are some obstacles to collision?
cheating new entrants number of firms demand and cost differences
interindustry competition
competition between 2 products associated with different industries example - aluminum and copper
the kinked demand curve of an oligopolist is based on the assumption that
competitors will follow a price cut but ignore a price increase
at the kink in the demand curve what is happening
consumer; price and output are optimized at the kink.
collusion
cooperation with rivals
the wide imitation and spread of an innovation is called
diffusion
what way does expected rate of return curve slop?
downward because of diminishing returns for R&D expenditures
inverted-U theory of R&D
expenditure percentages go up till 50% concentration ratio then goes down
complications of interdependence
firms cannot predict the reactions of their rivals with certainty . firms cannot determine profit maximizing price and output
what is used in an expensive form
game tree
technological advance improves allocative efficiency by
giving society a more-preferred mix of goods and services
Entrepenuers and innovative firms with past successes in developing products
have more access to resources for further innovation
what address the issue of dominant firms
herfindahl ratio
in a monopolistic completion what is the incentive and what is the turnoff?
incentive to differentiate but profits are temporary
In a pure competition what is the incentive and what is the turnoff?
incentive to innovate, but rate of return is low
U.S firms collectively devote the largest portion of their total R&D spending to
innovation and diffusion
the first working prototype of a microcomputer chip would be an example of
invention
what most directly relates to R&D expenditures?
inverted- U theory
a monopolistically competitive firm in the short run is producing where price is $3.00 marginal cost is $1.50. to maximize profits
it is unclear what the firm should do without marginal revenue
in a duopoly, if one firm increases its price, then the other firm can:
keep its prices constant and thus increase its market share
example of a short coming
localized market (monopoly) interindustry competition world trade dominant firms
can an innovation have a patent?
no
What is the kinked demand curve used for?
non- collusive oligopoly to explain their behaviors and pricing strategies
what was the old view of technology advancements?
random event from outside the economy
expected-rate-of-return curve
showing the anticipated gain in profit, as a percentage of R&D expenditure, from an additional dollar spent on R&d
interest-rate cost-of-funds curve
showing the interest rate a firm must pay to obtain any particular amount of funds to finance R&D.
What is the most closely associated with the "new and better goods and services and new and better ways of producing and distributing them"?
technological advance
the very long run would be a period in which
technology changes and the firms can introduce new products
What is game theory?
the analysis of how people (or firms) behave in strategic situations
invention
the discovery of a product or process combined with the first proof it will work
innovation
the first commercial introduction of a new product or process
Entrepreneur
the initiator, innovator, and risk bearer. combine the resources of land, labor, and capital
If oligopolistic firms facing similar cost and demand conditions successfully collude, price and output results in this industry will be most accurately predicted by which of the following models?
the pure monopoly model
How do oligopolies compete?
through advertising and product development - less easily duplicated then a price change
suppose the Marlen Fisher has a legal protection against anyone producing anything named "MarFish" this legal protection is most likely a ___________
trademark
in he long run, new firms will enter a monopolistically competitive industry
until economic profits are zero
