Econ 200 Exam 2 - Assignment Essays

question

game

answer

any situation involving at least two ppl that requires those involved to think strategically

question

game theory

answer

the study of how ppl behave strategically under different circumstances

question

simultaneous move game

answer

players pick their strategies at the same time

question

rules

answer

define actions allowed in the game

question

strategies

answer

the plans of action that players follow to achieve their goals

question

Prisoner's Dilemma

answer

a game in which pursuing dominant strategies results in noncooperation that leaves everyone worse off

question

Decision Matrix

answer

A tool used to compare design solutions against one another, using specific criteria

question

dominant strategy

answer

a strategy that is best for a player in a game regardless of the strategies chosen by the other players

question

dominant strategy equilibrium

answer

An outcome of a game in which every player plays his or her dominant strategy.

question

Nash Equilibrium

answer

a situation in which each firm chooses the best strategy, given the strategies chosen by other firms

question

non-cooperative equilibrium

answer

an equilibrium in a game in which players do not cooperate but pursue their own self-interest

question

commitment strategy

answer

an agreement to submit to a penalty in the future for defecting from a given strategy

question

repeated game

answer

a game that is played more than once

question

tit-for-tat strategy

answer

whatever the other player does, you do the same thing in response

question

Backwards Induction

answer

the process of reasoning backward, from the end of a game or situation to the beginning, in order to determine an optimal course of action (often done with decision tree)

question

decision tree

answer

Graph of decisions and their possible consequences, used to create a plan to reach a goal

question

first-mover advantage

answer

when the player who chooses first gets a higher pay-off than those who follow

question

ultimatum game

answer

one player makes an offer and the other player has the simple choice of whether to accept or reject

question

repeated sequential game

answer

- reduces first mover advantage
- advantage goes to patient player who places more value on money in the future relative to present
- holding out leads to greater pay-off

question

total revenue

answer

Price x Quantity

question

total cost

answer

fixed costs plus variable costs

question

profit

answer

total revenue minus total cost

question

fixed costs

answer

Costs that do not vary with the quantity of output produced

question

variable costs

answer

costs that vary with the quantity of output produced

question

explicit costs

answer

costs that require a firm to spend money

question

implicit costs

answer

Indirect, non-purchased, or opportunity costs of resources

question

accounting profit

answer

total revenue - explicit costs

question

economic profit

answer

total revenue - explicit costs - implicit costs

question

marginal product

answer

the increase in output that arises from an additional unit of input

question

diminishing marginal benefit

answer

The benefit gained from consuming an additional unit decreases as the total number of units increases.

question

Average Fixed Cost (AFC)

answer

fixed cost divided by the quantity of output

question

Average Variable Cost (AVC)

answer

variable cost divided by the quantity of output

question

Average Total Cost (ATC)

answer

total costs divided by quantity of output which equals AFC + AVC

question

Marginal Cost (MC)

answer

change in total cost divided by change in quantity

question

Total Cost Graph

answer

the graph is curved and is above variable cost

question

Average Cost Graph

answer

u-shaped

question

Marginal Cost Graph

answer

the graph is curved and shows the margin between total cost and variable cost

question

are all costs variable in the long run?

answer

yes

question

economies of scale

answer

when increasing the Q output lowers ATC

question

diseconomies of scale

answer

when increasing Q of output raises ATC

question

constant returns to scale

answer

when the increase in Q output is equal to the increase in TC so no change in ATC (ex. if input doubles, output doubles)

question

competitive market

answer

- price takers
- standardized
- full info
- no transaction costs

question

perfectly competitive market

answer

A market that meets the conditions of (1) many buyers and sellers, (2) all firms selling identical products, and (3) no barriers to new firms entering the market.

question

average revenue

answer

total revenue divided by the quantity sold which equals price

question

marginal revenue (in perfect competition)

answer

change in total revenue / change in quantity
P = MR = AR

question

perfect competition demand curve

answer

always horizontal, equals price = MR

question

profit equation

answer

(P - ATC) * Q

question

Marginal Profit equation

answer

MR-MC

question

Short-term shut-down rule

answer

shut-down if P < AVC, continue if P > than AVC because continuing to produce will cover variable costs as well as some of fixed costs

question

long run exit rule

answer

exit if P < ATC, even if losing money if MR = P is greater than AVC it still makes sense to produce in order to pay fixed costs in the SHORT RUN

question

effects of entry on LRSC

answer

- supply shifts right
- Peq decreases and Qeq increases which leads to a decrease in profits
- as long as profits are positive, firms will enter market
- when P = ATC (ATC is tangent to demand) there is no incentive to enter the market

question

effects of exit on LRSC

answer

- supply shifts left
- Qeq decreases, Peq increases which leads to increase in profits
- when EP = 0, no firms will leave

question

in the long run...

answer

- EP = 0 (except in monopoly)
- P = ATC = MC
- operate at efficient scale (Q is amount that minimizes ATC)
- demand and supply are close to perfectly elastic

question

Monopoly

answer

A market in which there are many buyers but only one seller.

question

barriers to entry in a monopoly

answer

monopoly resources, government regulation, production process

question

for a monopoly demand is...

answer

downward sloping

question

is MR < P in a monopoly?

answer

yes

question

quantity effect

answer

the increase in total revenue due to the money brought in by the sale of additional units

question

price effect

answer

the decrease in total revenue that occurs because the increase in quantity requires a lower price

question

Can monopolies earn economic profit in the long run?

answer

yes

question

profit-maximizing quantity

answer

where MR = MC

question

profit-maximizing price

answer

the price associated with the quantity sold at which marginal revenue equals marginal cost

question

For a firm with a linear demand curve (M, MC), does the MR curve start at the same point as demand and move down twice as fast?

answer

yes

question

anti-trust laws

answer

government laws, rules, and regulations to enforce competition and stop or reduce monopolistic practices like price fixing and bid-rigging
(can break up natural monopolies)

question

public ownership

answer

the good is supplied by the government or by a firm owned by the government

question

regulation

answer

government intervention in a market that regulates the behavior of natural monopolies (ex. price controls set at ATC which then ensures 0 economic profits and less DWL)

question

vertical splits

answer

divides the original firm into companies that operate at different points in the production process

question

no response

answer

when regulation is too hard to create or manage

question

price discrimination

answer

the business practice of selling the same good at different prices to different customers

question

Oligopoly

answer

a market structure in which only a few sellers offer similar or identical products (abt # of firms)
- all about strategic interactions between firms which impact P and Q for all firms and therefore profit

question

monopolistic competition

answer

a market structure in which many firms sell products that are similar but not identical (abt variety of products)

question

product differentiation

answer

firms must offer goods that are similar to competitors' products but more attractive in some ways

question

monopolisitic competition in the long run

answer

- because firms can enter and produce similar goods (substitues), demand for the original product decreases and shifts LEFT
- EP = 0
- exit and entry occur until ATC = P where MC = MR

question

MR intersects the x-axis at the TR maximizing quantity?

answer

true

question

Advertising

answer

- hard to tell what real info abt a product is in an ad
- asymmetric information
- way to signal credibility and quality of product

question

branding

answer

- characteristics that identify and differentiate a particular company/product
- strong brand = high quality product
- can be falsified

question

when QE > PE...

answer

increase in output leads to increase in profit

question

when PE > QE...

answer

no incentive to increase output

question

oligopolies have two choices:

answer

1. compete
2. collude

question

collusion

answer

when firms work together to make decisions abt P and Q
(functions the same as a monopoly and is less efficient than competitive oligopoly)

question

cartel

answer

# of firms collude to make collective decisions abt P and Q
- long-term interest to collude
- usually illegal

1 of 81

question

game

answer

any situation involving at least two ppl that requires those involved to think strategically

question

game theory

answer

the study of how ppl behave strategically under different circumstances

question

simultaneous move game

answer

players pick their strategies at the same time

question

rules

answer

define actions allowed in the game

question

strategies

answer

the plans of action that players follow to achieve their goals

question

Prisoner's Dilemma

answer

a game in which pursuing dominant strategies results in noncooperation that leaves everyone worse off

question

Decision Matrix

answer

A tool used to compare design solutions against one another, using specific criteria

question

dominant strategy

answer

a strategy that is best for a player in a game regardless of the strategies chosen by the other players

question

dominant strategy equilibrium

answer

An outcome of a game in which every player plays his or her dominant strategy.

question

Nash Equilibrium

answer

a situation in which each firm chooses the best strategy, given the strategies chosen by other firms

question

non-cooperative equilibrium

answer

an equilibrium in a game in which players do not cooperate but pursue their own self-interest

question

commitment strategy

answer

an agreement to submit to a penalty in the future for defecting from a given strategy

question

repeated game

answer

a game that is played more than once

question

tit-for-tat strategy

answer

whatever the other player does, you do the same thing in response

question

Backwards Induction

answer

the process of reasoning backward, from the end of a game or situation to the beginning, in order to determine an optimal course of action (often done with decision tree)

question

decision tree

answer

Graph of decisions and their possible consequences, used to create a plan to reach a goal

question

first-mover advantage

answer

when the player who chooses first gets a higher pay-off than those who follow

question

ultimatum game

answer

one player makes an offer and the other player has the simple choice of whether to accept or reject

question

repeated sequential game

answer

- reduces first mover advantage
- advantage goes to patient player who places more value on money in the future relative to present
- holding out leads to greater pay-off

question

total revenue

answer

Price x Quantity

question

total cost

answer

fixed costs plus variable costs

question

profit

answer

total revenue minus total cost

question

fixed costs

answer

Costs that do not vary with the quantity of output produced

question

variable costs

answer

costs that vary with the quantity of output produced

question

explicit costs

answer

costs that require a firm to spend money

question

implicit costs

answer

Indirect, non-purchased, or opportunity costs of resources

question

accounting profit

answer

total revenue - explicit costs

question

economic profit

answer

total revenue - explicit costs - implicit costs

question

marginal product

answer

the increase in output that arises from an additional unit of input

question

diminishing marginal benefit

answer

The benefit gained from consuming an additional unit decreases as the total number of units increases.

question

Average Fixed Cost (AFC)

answer

fixed cost divided by the quantity of output

question

Average Variable Cost (AVC)

answer

variable cost divided by the quantity of output

question

Average Total Cost (ATC)

answer

total costs divided by quantity of output which equals AFC + AVC

question

Marginal Cost (MC)

answer

change in total cost divided by change in quantity

question

Total Cost Graph

answer

the graph is curved and is above variable cost

question

Average Cost Graph

answer

u-shaped

question

Marginal Cost Graph

answer

the graph is curved and shows the margin between total cost and variable cost

question

are all costs variable in the long run?

answer

yes

question

economies of scale

answer

when increasing the Q output lowers ATC

question

diseconomies of scale

answer

when increasing Q of output raises ATC

question

constant returns to scale

answer

when the increase in Q output is equal to the increase in TC so no change in ATC (ex. if input doubles, output doubles)

question

competitive market

answer

- price takers
- standardized
- full info
- no transaction costs

question

perfectly competitive market

answer

A market that meets the conditions of (1) many buyers and sellers, (2) all firms selling identical products, and (3) no barriers to new firms entering the market.

question

average revenue

answer

total revenue divided by the quantity sold which equals price

question

marginal revenue (in perfect competition)

answer

change in total revenue / change in quantity
P = MR = AR

question

perfect competition demand curve

answer

always horizontal, equals price = MR

question

profit equation

answer

(P - ATC) * Q

question

Marginal Profit equation

answer

MR-MC

question

Short-term shut-down rule

answer

shut-down if P < AVC, continue if P > than AVC because continuing to produce will cover variable costs as well as some of fixed costs

question

long run exit rule

answer

exit if P < ATC, even if losing money if MR = P is greater than AVC it still makes sense to produce in order to pay fixed costs in the SHORT RUN

question

effects of entry on LRSC

answer

question

effects of exit on LRSC

answer

- supply shifts left
- Qeq decreases, Peq increases which leads to increase in profits
- when EP = 0, no firms will leave

question

in the long run...

answer

- EP = 0 (except in monopoly)
- P = ATC = MC
- operate at efficient scale (Q is amount that minimizes ATC)
- demand and supply are close to perfectly elastic

question

Monopoly

answer

A market in which there are many buyers but only one seller.

question

barriers to entry in a monopoly

answer

monopoly resources, government regulation, production process

question

for a monopoly demand is...

answer

downward sloping

question

is MR < P in a monopoly?

answer

yes

question

quantity effect

answer

the increase in total revenue due to the money brought in by the sale of additional units

question

price effect

answer

the decrease in total revenue that occurs because the increase in quantity requires a lower price

question

Can monopolies earn economic profit in the long run?

answer

yes

question

profit-maximizing quantity

answer

where MR = MC

question

profit-maximizing price

answer

the price associated with the quantity sold at which marginal revenue equals marginal cost

question

For a firm with a linear demand curve (M, MC), does the MR curve start at the same point as demand and move down twice as fast?

answer

yes

question

anti-trust laws

answer

government laws, rules, and regulations to enforce competition and stop or reduce monopolistic practices like price fixing and bid-rigging
(can break up natural monopolies)

question

public ownership

answer

the good is supplied by the government or by a firm owned by the government

question

regulation

answer

government intervention in a market that regulates the behavior of natural monopolies (ex. price controls set at ATC which then ensures 0 economic profits and less DWL)

question

vertical splits

answer

divides the original firm into companies that operate at different points in the production process

question

no response

answer

when regulation is too hard to create or manage

question

price discrimination

answer

the business practice of selling the same good at different prices to different customers

question

Oligopoly

answer

question

monopolistic competition

answer

a market structure in which many firms sell products that are similar but not identical (abt variety of products)

question

product differentiation

answer

firms must offer goods that are similar to competitors' products but more attractive in some ways

question

monopolisitic competition in the long run

answer

- because firms can enter and produce similar goods (substitues), demand for the original product decreases and shifts LEFT
- EP = 0
- exit and entry occur until ATC = P where MC = MR

question

MR intersects the x-axis at the TR maximizing quantity?

answer

true

question

Advertising

answer

- hard to tell what real info abt a product is in an ad
- asymmetric information
- way to signal credibility and quality of product

question

branding

answer

- characteristics that identify and differentiate a particular company/product
- strong brand = high quality product
- can be falsified

question

when QE > PE...

answer

increase in output leads to increase in profit

question

when PE > QE...

answer

no incentive to increase output

question

oligopolies have two choices:

answer

1. compete
2. collude

question

collusion

answer

when firms work together to make decisions abt P and Q
(functions the same as a monopoly and is less efficient than competitive oligopoly)

question

cartel

answer

# of firms collude to make collective decisions abt P and Q
- long-term interest to collude
- usually illegal

Order an Essay Now & Get These Features For Free:

Turnitin Report

Formatting

Title Page

Citation

Outline

Place an Order