Monopolistic Competition and Oligopoly
For the herfindahl hirschman index how do you find it
S1%^2 + ..........
How do you calculate the four firm concentration ratio
Sales of four largest firms/total sales of industry x 100
The first antitrust laws enacted in the US which made every contract combination or conspiracy in restraint of trade illegal
Sherman act
What's the one thing the two methods of concentration have in common
The higher the number the more concentrated in the industry
What are the characteristics of a monopolistically competitive firm
A relatively large number of producers in the market A differentiated product Sellers with some control over the prices they charge Relatively easy market entry and exit
An antitrust law that made unfair methods of competition and unfair or deceptive acts or practices illegal
Federal trade commission
What happens as markets grow and firms enter
We would expect prices to fall and output to increase and economies efficiency to improved
Producing the goods and services that are most wanted by consumers in such a way that their marginal benefit equals their marginal cost
Allocative efficiency
Laws designed to prevent firms from engaging in behaviors that would lessen competitive in markets
Antitrust laws
Where do the marginal revenue curves lie for monopolistically competitive markets
Below their demand curves
A group of competing companies that aim to maximize joint profits by coordinating their policies their policies to fix prices manipulate output or restrict competition
Cartel
An antitrust law that prohibits mergers that would substantially lessen competition or create a monopoly as well as some specific business practices such as price fixing and tying contract
Clayton act
A situation in which decision makers coordinate their actions to achieve a desired outcome
Collusion
The value of economic surplus that is forgone when a market is not allowed to adjust its competitive equilibrium
Deadweight loss
A situation in which a practical strategy yields the highest payoff for a decision maker regardless of the other decision makers strategy
Dominant strategy
The level of profit that occurs when total revenue is greater than total cost
Economic profit
A concentration ratio that measures the percentage of sales by the four largest firms in a particular industry
Four firm concentration ratio
The study of the strategic behavior of decision makers
Game theory
A concentration index that measures the sum of the squared percentage of sales from all firms in a particular industry
Herfindahl Hirschman Index
The closer substitutes are for a product the more ________n its demand will be
Horizontal
Is the equilibrium output produced by an oligopolistic firm allocatively or productively efficient
It's neither
How do you determine whether a monopolistically competitive firm is generating a economic profit
Look at whether the average total cost curve intersects the demand curve
The level of profit that occurs when total revenue is less than total cost
Loss
The percentage of total market sales accruing to one specific firm
Market share
A market structure characterized by a relatively large number of sellers producing a differentiated product for which they have some control over the price they charge in a market with relatively easy market entry and exit
Monopoilsitc competition
A market structure characterized by a single seller producing a good or service for which there are no close substitutes, in a market in a relatively blocked entry
Monopoly
A situation in which a change in the strategy followed by one producer will likely affects the sales, profits, and behavior of another producer
Mutual interdependence
An outcome in which decision makers choose their dominant strategy and each has no incentive to independently change his or her strategy
Nash equilibrium
Are cartels good for the consumers
No so most countries have created anti trust laws that make it illegal for firms to covertly or overtly coordinate their activities
The level of profit that occurs when total revenue is equal to total cost also known as zero economic profit
Normal profit
a market structure characterized by a few large producers of either standardized or differentiated products operating in industries with extensive barriers
Oligopolies
Are price makers and behave strategically when making decisions related to future prices and advertising their products
Oligopoly
A table showing the potential outcomes arising from the choices made by decision makers
Payoff matrix
What does monopolistically competitive marketers combine
Perfectly competitive and monopolistic markets
The strategy of distinguishing one firms products from the competing products of other firms
Prodcut differention
The strategy of distinguishing one firms product from the competing products of other firms
Product differentiation
producing output at the lowest possible total cost per unit of production is:
Productive efficiency
Why are the demand curves in monopolistically competitive markets more elastic
There are competitors making close substitutes
What is the rule that monopolistically competitive, perfectly competitive, and monopolistic firms all follow
They profit maximizing rule- produce output at the point in which marginal revenue equals marginal cost