question

What is optimal output or quantity on a demand curve in a monopolistic competitive environment?

answer

Where marginal revenue=marginal cost

question

What is a firms optimal price in a monopolistic competitive environment?

answer

Take units produced at MR=MC and go up to demand line and over to the price. That is your optimal price.

question

What are firms maximum profits in a monopolistic competitive environment?

answer

Optimal price-Avg total cost x Optimal quantity (Note: Average total cost is where optimal quantity meet ATC line).

question

Given elasticity of demand for product and elasticity of demand for advertising, how do you determine advertising to sales ratio?

answer

Elasticity of Advertising/Elasticity of Product= Answer. (Note: Ignore signs of numbers).

question

How do you find profit maximizing level of advertising, given the revenues?

answer

Take optimal advertising ratio answer x Revenues= Profit maximizing of advertising.

question

Companies that offer new products in short run in monopolistic environment

answer

They make short run profits, but in long run, other companies will innovate and their economic profit becomes 0.

question

How do you calculate advertising elasticity?

answer

Take advertising to sales x elasticity of demand. Above 1 is elastic and farther out means it's more responsive.

question

How do you calculate the HHI Premerger Index?

answer

Take number of firms x (Percentage of market share) SQUARED. If two firms merge, take two off of HHI firm number.

question

If HHI is less than 2,500

answer

You may be fine to merge, but it may be challenged.

question

If a monopolist is unregulated, how do you determine it's profit maximizing price?

answer

Where MR=MC, go up to demand curve and it's that price.

question

What level of consumer surplus will the price be if a monopolist is unregulated?

answer

Consumer surplus is the area under demand curve and above price.

question

If a firm is able to cover variable costs at regulated price, in the short run, what will it produce?

answer

Where regulated price meets demand on graph.

question

In the long run, what will happen if a firm continues to operate at a regulated price below Average Total Cost?

answer

It will make $0

question

If you are a monopolist, your optimal price per unit is?

answer

(elasticity of demand/ 1+elasticity of demand) x Marginal Cost.

Note: Watch the signs, if it's a - elasticity, just put the number up against the 1, even though the formula has a +.

Note: Watch the signs, if it's a - elasticity, just put the number up against the 1, even though the formula has a +.

question

If you charge the same unit price to customers, how do you determine optimal price?

answer

Where MC=MR, go up to demand curve and over to price.

question

If you charge the same unit price to customers, how do you determine optimal output or quantity?

answer

Where MC=MR, go down to quantity.

question

If you charge the same unit price to customers, how do you determine your profits?

answer

quantity (NOTE: Where MC=MR) x (Optimal Price-MC)= Answer

question

If you engage in first degree price discrimination, how do you determine optimal price?

answer

Price at top of demand curve, down to price where demand meets MC.

question

If you engage in first degree price discrimination, how do you determine optimal quantity or output?

answer

The quantity where MC=Demand

question

How do you determine profits if you engage in first degree price discrimination?

answer

Take quantity or output (NOTE: The quantity where MC=Demand) x (top of demand curve price) - (price where demand meets MC) x (.5)

question

How do you determine optimal price if you engage in two-part pricing?

answer

Charge a fixed fee of first degree price discrimination price, then price where MC=D until you receive total profits of that fixed fee.

question

How do you determine optimal mark ups and pricing under third degree price discrimination with two groups?

answer

Elasticity of demand/ 1 + Elasticity of Demand x Marginal Cost. (NOTE: Aside from formula signs, just put elasticity number in there. If negative then just put - next to the 1).

question

Third degree price discrimination may come in handy:

answer

To prevent resale between two groups.

question

How do you figure bundling problems with various types?

answer

Low cost = all higher consumers buy. So, multiply amount of consumers by low price. (Look at question 7 again).

question

For bundling question regarding if you charge number for bundle containing X and Y:

answer

Take price of bundle x all consumers (Look this over again).

question

Where is consumer surplus on a graph?

answer

area below the demand curve and above the price

question

Where is production surplus on a graph?

answer

The area below market price and above supply curve (line).

question

In a perfect competition, what is price?

answer

P=MR, as opposed to monopoly where P no longer = MR.

question

Where is deadweight loss on monopolist graph?

answer

Monopoly charges same price for each customer, so where Pm goes over to demand curve and where Qm goes up to demand curve, the triangle to right.

question

Where is total welfare of graph?

answer

Consumer surplus + Producer surplus

question

Different types of elasticities?

answer

Elastic: Demand if elastic if absolute value of own price elasticity is greater than 1.

Inelastic: Demand is inelastic if absolute value of own price elasticity is less than 1.

Unitary: Demand is unitary elastic if absolute value of own price elasticity is equal to 1.

Inelastic: Demand is inelastic if absolute value of own price elasticity is less than 1.

Unitary: Demand is unitary elastic if absolute value of own price elasticity is equal to 1.

question

How do you calculate own price elasticity?

answer

The % change in quantity demanded/percentage change in price of the good.

question

Total Revenue Test

answer

If demand is elastic, an increase (decrease) in price will lead to a decrease (increase) in total revenue. If demand is inelastic, an increase (decrease) in price will lead to an increase (decrease) in total revenue. Finally, total revenue is maximized at the point where demand is unitary elastic.

question

What does dead weight loss look like on graph?

answer

It's the consumer and producer surplus that is lost by charging a price in excess of marginal cost.

question

Where is producer surplus and consumer on price ceiling?

answer

If asked what is CS or PS value subtract numbers from one another.

question

How much should monopolist produce on graph?

answer

All firms should make quantity where MC=MR, if it's under ATC, firms will lose money in long run.

question

Think back to perfect competition: how can the individual firm adjust its price to maximize revenue?

answer

a.It should charge the price where demand is unitary elastic b.It should charge a price just a little lower than its closest competitor c.It can't adjust away from the going price

question

The lerner index can give us info on a firms market power.

answer

First degree= Seller charges customized price to each customer.

Second Degree= Bulk Discounting

Third Degree= Market segmentation.

Second Degree= Bulk Discounting

Third Degree= Market segmentation.

question

Different types of price discrimination

answer

1) Significant fixed costs=natural monopoly.

2) Economies of Scale: Exist whenever long-run average costs decline as output increases.

3) Economies of Scope: Exist when the total cost of producing two products within the same firm is lower than when the products are produced by separate firms.

2) Economies of Scale: Exist whenever long-run average costs decline as output increases.

3) Economies of Scope: Exist when the total cost of producing two products within the same firm is lower than when the products are produced by separate firms.

question

Barriers to entry in monopoly

answer

From the point of view of the firm, entry plays out as decreased demand for that firm's product•The demand (and MR) curve shift left•This continues until profits equal zero!

DEMAND AND MR CURVE (LINE) SHIFT LEFT.

DEMAND AND MR CURVE (LINE) SHIFT LEFT.

question

Demand and MR for monopolist

answer

...

question

What does long run look like in monopolistic competition?

answer

A strategy where a firm responds to under-pricing by choosing a price so low that each firm makes zero economic profit. AS SOON AS OPPONENT DEFECTS, THEY WILL DEFECT THE REMAINDER OF THE GAME.

question

Payoff Matrix, simultaneous, one shot

answer

an economic concept that states that the price of a good rises and falls depending on how many people want it (demand) and depending on how much of the good is available (supply)

question

tit-for-tat strategy

answer

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question

What is the grim trigger strategy?

answer

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question

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answer

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question

Supply and Demand

answer

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question

Supply and Demand

answer

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