Microeconomics Test 3

- single seller
- no good substitutes
- high barriers to entry

actions by individuals and groups designed to restructure public policy in a manner that will either directly or indirectly redistribute more income to themselves or the projects they promote

agreement among firms to avoid various competitive practices, particularly price reductions

less efficient

MR = MC

high barriers to entry

they restrict production, by producing less they can sell it at a higher price

a market situation in which the average costs of production continually decline with increased output

1. control the structure of the industry to ensure the presence of rival firms
2. reduce artificial barriers that limit competition
3. regulate the price and output of firms in the market
4. supply the market with goods produced by a government firm

- lack of information
- cost shifting
- special interest influence

a market situation in which a small number of sellers constitutes the entire industry

MR = MC

1. price leadership
2. collusion
3. kinked demand curve

explains stability of prices

an organization of sellers designed to coordinate supply decisions so that the joint profits of the members will be maximized

the resource itself has no intrinsic value

it stems from the demand for the final good the resource helps produce

- substitution in production
- substitution in consumption

- change in the demand for the product
- change in the productivity of the resource
- change in the price of a related resource

marginal revenue product: the change in total revenue of a firm that results from the employment of one additional unit of a resource

MRP = MRC

because of the law of diminishing returns, the marginal product of a resource will fall as employment of the resource expands

there is a direct relationship between the price of a resource and the quantity supplied

- resource mobility
- time

the purchase, construction, or development of capital resources, including both nonhuman and human capital

MP(a) / P(a) = MP(b) / P(b) = MP(c) / P(c)

- worker productivity and specialized skills
- worker preference
- race and gender discrimination

a form of compensation in which the top performer receives much higher rewards than do other competitors, even if the others perform at only a slightly lower level

their productivity is greater

- government regulations (licensing)
- specialized skills

high productivity

if the automation reduces costs of production and allows for more efficiency

higher costs and a competitive disadvantage

some workers are more productive than others

no employer will discriminate if they want to thrive as a business

productivity

5%

the desire of consumers for goods now rather than in the future

- true interest rate
- inflation
- risk

you must save first to invest

the current worth of future income after it is discounted to reflect the fact that revenues in the future are valued less highly than revenues now

NPV = R / (1 + i)

i is the percentage in decimal form

PV = R / (1 + i)^2

2 = 2 years from now, can be substituted for number of years later to find discount value

rule of 72 (sometimes listed as 70) indicates that the principle doubles based on 72/r. Thus if the interest rate is 6 the principle will double in 12 years. If the interest rate is 12 then the principle doubles in 6 years

- uncertainty
- entrepreneurship

entrepreneurship

saving and investment allocated efficiently by competitive financial markets

wages, 80% of GDP