All Flashcards
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.
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.
What is imperfect competition?
Market structure where at least one characteristic of perfect competition is not met, allowing firms some market power.
What are barriers to entry?
Obstacles preventing new firms from entering a market, such as high start-up costs or government regulations.
What is a price maker?
A firm with the power to influence the market price of its product.
What is non-price competition?
Firms differentiating their products through advertising, branding, or quality rather than price.
What is a monopoly?
A market structure with a single firm producing a unique product with no close substitutes.
What is a natural monopoly?
A monopoly that arises due to significant economies of scale, making it more efficient for one firm to serve the entire market.
What is price discrimination?
Charging different prices to different customers for the same product, based on their willingness to pay.
What is monopolistic competition?
A market structure with many firms selling differentiated products with low barriers to entry.
What is an oligopoly?
A market structure dominated by a few large firms, leading to interdependence and strategic interaction.
What is a dominant strategy?
In game theory, a strategy that yields the highest payoff for a player regardless of the other players' strategies.
What is Nash Equilibrium?
A stable state in game theory where no player has an incentive to unilaterally change their strategy, given the strategies of others.