Revise later
SpaceTo flip
If confident
All Flashcards
What is the impact of government regulation on natural monopolies?
Regulation can force natural monopolies to lower prices and increase output, improving efficiency.
What is the impact of antitrust laws on oligopolies?
Antitrust laws prevent collusion and promote competition, leading to lower prices and increased output.
What is the impact of patents on innovation?
Patents incentivize innovation by granting temporary monopoly power, but also create deadweight loss.
How do barriers to entry affect long-run profits?
High barriers to entry allow firms to sustain economic profits in the long run, as new firms cannot easily enter to compete away those profits.
How does product differentiation impact demand?
Product differentiation creates brand loyalty, making the demand curve for a firm's product less elastic.
How does advertising affect monopolistic competition?
Advertising increases demand and differentiates products, but also increases costs, impacting profitability.
How does interdependence affect oligopolies?
Firms must anticipate rivals' actions when making decisions, leading to strategic interactions and potential collusion.
How does price discrimination increase profits?
By charging different prices to different groups, a firm can capture more consumer surplus and increase overall revenue.
How does MR relate to DARP in a monopoly?
Marginal Revenue (MR) is below Demand, Average Revenue, and Price (DARP) curve.
How do patents create monopolies?
Patents give a firm exclusive rights to produce a product, preventing competition and creating a monopoly.
How does zero economic profit arise in monopolistic competition?
Low barriers to entry allow new firms to enter, increasing supply and driving down prices until economic profits are eliminated.
How does a dominant strategy simplify decision-making?
It provides a clear best option regardless of what competitors do, removing uncertainty.
How does collusion affect market outcomes?
Collusion allows firms to act like a monopoly, raising prices and reducing output, harming consumers.
How does a firm maximize profit?
Produce where MR = MC to maximize profit, then raise the price to the demand curve at that quantity.
Analyze the monopoly graph.
Monopolies produce where MR=MC, then set price according to the demand curve; results in deadweight loss and productive/allocative inefficiency.
Analyze the price-discriminating monopoly graph.
The firm charges different prices to different customers, resulting in no deadweight loss and no consumer surplus.
Analyze the monopolistic competition graph.
In the long run, the firm's demand curve is tangent to the ATC curve, resulting in zero economic profit.
What does the area between the demand curve and the price represent in a monopoly graph?
Consumer surplus. Monopolies reduce consumer surplus compared to perfect competition.
What does the area between ATC and price represent in a monopoly graph?
Economic profit. Monopolies can sustain economic profit in the long run.
What does the MR=MC intersection represent in a monopoly graph?
Profit-maximizing quantity. The monopolist produces this quantity to maximize its profits.
What does the P=MC represent in a perfectly competitive market?
Allocative efficiency. A perfectly price-discriminating monopolist produces at the allocatively efficient level.
What does the lowest point on the ATC curve represent?
Productive efficiency. Monopolies are not productively efficient.