eco 146 after exam 2 concepts - Assignment Essays

Q: MR < MC

firms could reduce output by 1 unit and reduce losses

question

MC equals output price

answer

firms produce output up to the point where?

question

answer

in a competitive market, MR = ?

question

cost of production

answer

profits are highest when the benefit of producing an extra unit exactly equals its?

question

marginal revenue

answer

benefit of additional unit

question

marginal cost

answer

cost of an additional unit

question

MR > MC

answer

firm could increase output by 1 unit and add to profits

question

MR < MC

answer

firms could reduce output by 1 unit and reduce losses

question

producing level of output where p = MC, on rising portion of MC curve
- subject to condition that p > AVC

answer

firm maximizes short run profits by?

question

shutdown condition

answer

if price falls below the minimum of average variable cost, the firm should shut down in the short run

question

price = marginal revenue

answer

under perfect competition, average revenue = ?

question

1. P = MC on rising portion of MC curve
2. P must be > AVC

answer

how to identify the individual firm's short run supply curve

question

MC > AVC

answer

when does the firm's SR supply curve = MC curve?

question

Q = 0

answer

if MC < AVC firm supplies?

question

industry supply curve

answer

equal to the horizontal summation of individual supply MC curves

question

short-run competitive equilibrium

answer

output price is determined by the intersection of industry supply and market demand

question

1. firm earns positive economic profits
2. firm earns negative economic profits (that are smaller than FC)
3. firm shuts down

answer

three potential situations in the short run

question

- profits = pQ - ATCQ
- TC - ATC*Q
- these are economic profits because ATC includes the opportunity cost of capital

answer

positive economic profits

question

- profits = pQ - ATCQ < 0
- P > AVC so firm will not shut down, but SR profits are negative

answer

negative economic profits

question

in the short run a firm may earn negative profits but continue to operate

answer

if AVC < p < ATC

question

shift in supply causes a reduction in output price, p

answer

market supply adjustment

question

shift the short run MC curve left

answer

if L is reduced due to a drop in p, this would cause a movement down the curve. as firms transition to long run, it will also reduce its capital stock

question

long run equilibrium

answer

- will occur when all firms in the industry are making zero economic profit
- will occur when all firms have adjusted K, L, and Q at the point where p = SMC at the minimum point on LAC curve
- short run ATC to also tangent to LAC at this point
- PROFIT = 0 for all firms

question

1. like short run equilibrium there is allocative efficiency
2. p = minimum point on LAC
3. all producers earn zero economic profit
4. the competitive equilibrium also has implications for consumer welfare

answer

characteristics of perfectively competitive equilibrium

question

first fundamental theorem of welfare economics

answer

the allocation of goods and inputs that arises in a general competitive equilibrium is economically efficient. that is, given the resources available to the economy, there is no other feasible allocation of goods and inputs that could simultaneously make all consumers better off.

question

initial endowments

answer

the initial holdings of goods from which trading begins

question

second fundamental theorem of welfare economics

answer

any point on the UPF may be achieved through a suitable lump-sum redistribution of the initial endowment followed by competitive exchange

question

lump sum (or head) tax

answer

any other tax will cause distortion in the economy

question

flat

answer

long run supply curve is?

question

a firm's LAC curve with shift upward as the industry expands & upward sloping

answer

if pecuniary diseconomies exist?

question

demand curve for the entire market

answer

a monopoly's demand curve is?

question

sources of monopoly

answer

patents, network economies, and government licenses and franchises

question

profit

answer

TR-TC

question

MR has same intercept as demand curve but twice the slope

answer

MR = a - 2bQ ; MR under monopoly

question

inelastic

answer

monopolist will never produce a level of output on the _____ part of the demand curve

question

MR=MC

answer

profit maximization

question

price discrimination

answer

the business practice of selling the same good at different prices to different customers; increases monopoly profits

question

first degree price discrimination

answer

charging each individual customer a different price based on their willingness to pay

question

second degree price discrimination

answer

practice of charging different prices per unit for different quantities of the same good or service

question

block rate pricing

answer

- charge the highest price for purchases up to Q1
- lower the price for purchases from Q1 to Q2
- lower the price yet again for purchases from Q2 to Q3
- higher levels of quantity have the lowest marginal cost to the consumer

question

hurdle model

answer

monopolist puts up a "?" for price sensitive consumers to "jump to get a lower price. ex. rebates, coupons, "ask about our special low price," and sub club card

question

monopolist demand curve

answer

P = a - b*Q

question

two-price problem

answer

...

question

deadweight loss in monopoly

answer

net loss to society when a firm uses its market power to restrict output and increase price

question

cartel

answer

a formal organization of producers that agree to coordinate prices and production

question

nash equilibrium

answer

a situation in which economic actors interacting with one another each choose their best strategy given the strategies that all the other actors have chosen

question

backward induction

answer

the process of analyzing a problem in reverse, starting with the last choice, then the second-to-last choice, and so on, to determine the optimal strategy

question

firms explicitly account for other firm's expected behavior when devising strategies

answer

key principle that carries over to specific models of oligopoly

question

key assumption is that each firm takes the other's output as fixed and unresponsive to their own output

answer

key assumption for cournot model

1 of 48

question

MC equals output price

answer

firms produce output up to the point where?

question

answer

in a competitive market, MR = ?

question

cost of production

answer

profits are highest when the benefit of producing an extra unit exactly equals its?

question

marginal revenue

answer

benefit of additional unit

question

marginal cost

answer

cost of an additional unit

question

MR > MC

answer

firm could increase output by 1 unit and add to profits

question

MR < MC

answer

firms could reduce output by 1 unit and reduce losses

question

producing level of output where p = MC, on rising portion of MC curve
- subject to condition that p > AVC

answer

firm maximizes short run profits by?

question

shutdown condition

answer

if price falls below the minimum of average variable cost, the firm should shut down in the short run

question

price = marginal revenue

answer

under perfect competition, average revenue = ?

question

1. P = MC on rising portion of MC curve
2. P must be > AVC

answer

how to identify the individual firm's short run supply curve

question

MC > AVC

answer

when does the firm's SR supply curve = MC curve?

question

Q = 0

answer

if MC < AVC firm supplies?

question

industry supply curve

answer

equal to the horizontal summation of individual supply MC curves

question

short-run competitive equilibrium

answer

output price is determined by the intersection of industry supply and market demand

question

1. firm earns positive economic profits
2. firm earns negative economic profits (that are smaller than FC)
3. firm shuts down

answer

three potential situations in the short run

question

- profits = pQ - ATCQ
- TC - ATC*Q
- these are economic profits because ATC includes the opportunity cost of capital

answer

positive economic profits

question

- profits = pQ - ATCQ < 0
- P > AVC so firm will not shut down, but SR profits are negative

answer

negative economic profits

question

in the short run a firm may earn negative profits but continue to operate

answer

if AVC < p < ATC

question

shift in supply causes a reduction in output price, p

answer

market supply adjustment

question

shift the short run MC curve left

answer

if L is reduced due to a drop in p, this would cause a movement down the curve. as firms transition to long run, it will also reduce its capital stock

question

long run equilibrium

answer

question

answer

characteristics of perfectively competitive equilibrium

question

first fundamental theorem of welfare economics

answer

question

initial endowments

answer

the initial holdings of goods from which trading begins

question

second fundamental theorem of welfare economics

answer

any point on the UPF may be achieved through a suitable lump-sum redistribution of the initial endowment followed by competitive exchange

question

lump sum (or head) tax

answer

any other tax will cause distortion in the economy

question

flat

answer

long run supply curve is?

question

a firm's LAC curve with shift upward as the industry expands & upward sloping

answer

if pecuniary diseconomies exist?

question

demand curve for the entire market

answer

a monopoly's demand curve is?

question

sources of monopoly

answer

patents, network economies, and government licenses and franchises

question

profit

answer

TR-TC

question

MR has same intercept as demand curve but twice the slope

answer

MR = a - 2bQ ; MR under monopoly

question

inelastic

answer

monopolist will never produce a level of output on the _____ part of the demand curve

question

MR=MC

answer

profit maximization

question

price discrimination

answer

the business practice of selling the same good at different prices to different customers; increases monopoly profits

question

first degree price discrimination

answer

charging each individual customer a different price based on their willingness to pay

question

second degree price discrimination

answer

practice of charging different prices per unit for different quantities of the same good or service

question

block rate pricing

answer

question

hurdle model

answer

monopolist puts up a "?" for price sensitive consumers to "jump to get a lower price. ex. rebates, coupons, "ask about our special low price," and sub club card

question

monopolist demand curve

answer

P = a - b*Q

question

two-price problem

answer

...

question

deadweight loss in monopoly

answer

net loss to society when a firm uses its market power to restrict output and increase price

question

cartel

answer

a formal organization of producers that agree to coordinate prices and production

question

nash equilibrium

answer

a situation in which economic actors interacting with one another each choose their best strategy given the strategies that all the other actors have chosen

question

backward induction

answer

the process of analyzing a problem in reverse, starting with the last choice, then the second-to-last choice, and so on, to determine the optimal strategy

question

firms explicitly account for other firm's expected behavior when devising strategies

answer

key principle that carries over to specific models of oligopoly

question

key assumption is that each firm takes the other's output as fixed and unresponsive to their own output

answer

key assumption for cournot model

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