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consumer surplus
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is the difference between what a consumer is willing to pay and what they paid for a product
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producer surplus
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is the difference between the market price and the lowest price a producer is willing to accept
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Price Taker
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Perfect Competition markets (the market sets the price, they have no control over market prices)
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price maker
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Monopolies (no competitors and no close substitutes leads monopolies to make the price in the market)
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Monopolistic Competition
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-Singular seller w no close substitutes
-Type of product is the degree of uniqueness
-Prices are created by the monopolist so they can temporarily raise prices and boost advertising to prevent competitors from succeeding
-low barriers to entry and exit
-Type of product is the degree of uniqueness
-Prices are created by the monopolist so they can temporarily raise prices and boost advertising to prevent competitors from succeeding
-low barriers to entry and exit
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Oligopoly
answer
-Few very large firms
-Can be differentiated or homogeneous
-High barriers to entry like tech, market share, patents, control of raw materials, mergers, collusion
-Can be differentiated or homogeneous
-High barriers to entry like tech, market share, patents, control of raw materials, mergers, collusion
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fixed costs
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rent and lease costs, salaries, utility bills, insurance, business licenses
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variable costs
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raw materials, piece-rate labor, production supplies, commissions, delivery costs, packaging supplies, and credit card fees
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total costs
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sum of all costs
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ATC = AFC + AVC
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average total cost = average fixed cost +average variable cost
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MR=D=AR=P
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marginal revenue=demand=average revenue=price
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chop sticks
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MR & D=AR=P
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Normal Profit vs. Economic Profit
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economic profit= P>ATC
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long run
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all factors are variable, there are no fixed factors.
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Perfectly Competitive Markets
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there are factors which are fixed, and can not be changed by management.
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Short run
answer
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