Microeconomics Unit 4
Technological advance
- New and better products - Better ways of producing and distributing those products - Occurs over the very long run
Invention
- New product or process - Based on scientific knowledge ; Patent protection - the duration of patents in 20 years
Innovation
- Product innovation - Process innovation - Cannot be patented
Oligopoly
A market structure in which a few large firms dominate a market -A few large producers -Homogeneous oligopoly -Differentiated oligopoly -Limited control over price -Strategic behavior -Mutual interdependence -Entry barriers
Pure Monopoly
A market structure in which one firm sells a unique product, into which entry is blocked, in which the single firm has considerable control over product price, and in which nonprice competition may or may not be found.
The Law of Diminishing Marginal Returns
As more of a variable resource is added to a given amount of a fixed resource, marginal product eventually declines and could become negative
The free enterprise system is one of several basic market models
False
Fixed Costs vs. Marginal Costs vs. variable costs
Fixed cost= cost that does not change with an increase or decrease in the amount of goods or services produced or being sold (i.e. rent). Marginal costs= costs that increase per additional unit of production. Variable Costs= costs that vary with the quantity of output produced
Long run
No change in technology
Short run
No change in technology, plant, or equipment
Examples of Monopolies
Public utility companies: natural gas, eclectic, cable television Near monopolies: intel, android Professional sports teams
R&D
Research and Development: Business or government activity that is purposely designed to stimulate invention and innovation
Very long run
Technology changes with R&D
monopolistic competition
a market structure in which many companies sell products that are similar but not identical
product differentiation
a positioning strategy that some firms use to distinguish their products from those of competitors
Product Standardization
an orientation for assessing whether to use a global versus local marketing strategy concentrating on a high-tech to high-touch continuum
When economists view technological change as internal to the economy, they mean that it
arises deliberately from the profit motive and competition
A defining characteristic of an oligopolistic market is that there are
few sellers
A monopolistically competitive firm has a
highly elastic demand curve
The total cost of producing zero units is known as
highly elastic demand curve
A measure of the alternative goods that society forgoes in using resources to produce an additional unit of some specific product is
marginal cost
The law of diminishing returns in a manufacturing plant of a fixed capacity implies that, eventually, employing one
more worker will decrease the average amount of output per worker.
Which of the following is not a basic characteristic of monopolistic competition?
price maker
A purely competitive firm is a ________ ________ while a monopolist is a ________ _______
price taker ; price maker
An industry comprising a very large number of sellers producing a standardized product is known as
pure competition
If a firm has at least some control over the price of its product, then the firm cannot be in which market model?
pure competition
In which of the following industry structures is the entry of new firms the most difficult
pure monopoly
market entry
rising prices draw new firms into a market and add to the quantity supplied of a good
Assume that the market for corn is purely competitive. Currently, firms growing corn are suffering economic losses. In the long run, we can expect
some firms to exit, causing the market price of corn to rise
Pure competition
the market structure that exists when there are many small businesses selling one standardized product
A dilemma of regulation is that
the regulated price that achieves allocative efficiency may also create barriers to entry that foster monopoly power of firms
The total cost of producing zero units is known as
the total fixed cost
market size
the total level of sales of all producers within a market
When oligopolists collude
they collectively tend to achieve similar results as a monopolist
substitues
two goods for which an increase in the price of one leads to an increase in the demand for the other
The traditional view of technological advance was that it
was a random external force to which the economy adjusted