question
Perfect Competition
answer
- Large # of buyers and sellers
- Homogenous product
- Perfect information
- No transaction costs
- Free entry and exit
- Homogenous product
- Perfect information
- No transaction costs
- Free entry and exit
question
Monopoly
answer
- No close substitutes
- Price maker
- Blocked entry
- Non-price competition
- in which one firm tries to distinguish its product or service from competing products on the basis of attributes like design and workmanship"
- Price maker
- Blocked entry
- Non-price competition
- in which one firm tries to distinguish its product or service from competing products on the basis of attributes like design and workmanship"
question
Firm's short run decision to produce or not to produce
answer
- The firm is not producing
- Shut down in the short, exit in the long run
- Shut down in the short, exit in the long run
question
Standard Oil 1911
answer
• Ruled that only unreasonable attempts to monopolize violated Section II - restraint of trade
• Rule of Reason introduced
• Some practices are illegal per se (inherent nature); no question of intent - judge by the character not be degree of reasonableness (e.g. price fixing)
• Rule of Reason introduced
• Some practices are illegal per se (inherent nature); no question of intent - judge by the character not be degree of reasonableness (e.g. price fixing)
question
USS 1920
answer
- An industrial combination short of a monopoly is not objectionable under the act merely because of its size -- its capital and power of production -- or merely because of a power to restrain competition, if not exerted.
question
ALCOA
answer
- "pure" monopolist in the production of primary aluminum ingot. Its dominance was explained by several factors including:(1) control of patents; and (2) barriers to entry due to absolute cost advantages (bauxite ore and hydroelectric power).
question
Net Present Value
answer
the present value of current and future benefits minus the present value of current and future costs
question
Elasticity of demand
answer
consumers' responsiveness or sensitivity to changes in price
question
Lerner Index
answer
a measure of a firm's markup, or its level of market power
question
Consumer surplus
answer
the difference between the highest price a consumer is willing to pay for a good or service and the actual price the consumer pays
question
Producer surplus
answer
the amount a seller is paid for a good minus the seller's cost of providing it
question
welfare loss due to monopoly
answer
the consumers' surplus lost by consumers and not gained by the monopolist that results when a monopoly produces a less-than-competitive amount of output and charging a greater-than-competitive price; also called deadweight cost
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