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economics

Review For Microeconomics

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Posted on 
May 22nd, 2023
Home economics Review For Microeconomics
question
What are the legal types of businesses in our economy?
answer
Sole Proprietorship
Partnership
Corporation
Cooperation
question
Which ones are the most influential in terms of revenues?
answer
Corporation
Partnership
Sole Proprietorship
Cooperative
question
% of total U.S. firms
answer
Sole Proprietorship-71%
Partnership-10%
Corporation-19%
Cooperative- < 1%
question
% of Bus. Receipts
answer
Sole Proprietorship- 4%
Partnership-15%
Corporation-81%
Cooperative-<1%
question
What are the four industry models used to analyze American Industry?
answer
Pure Competition
Pure Monopoly
Monopolistic Competition
Oligopoly
question
Pure Competition (Farms, Ranches)
answer
Characteristics:
Large number of firms
Standardized products
Price Takers
Easy Entry
Perfectly Elastic Demand
Long Run(LR): Normal Profits
High Output
Low Prices
Most efficient industry
No LR profits for research and development
question
Pure Monopoly (unregulated)
answer
Characteristics:
One firm with 90 percent or more of market share
Unregulated (Ticketmaster, DeBeers)
Unique products
Price Makers
Blocked Entry
Inelastic Demand
Long Run: Economic Profits
Low or restricted output
High prices
Most inefficient industry
LR profits enough for research and development
Commit price discrimination:
Charging 2 consumers 2 different prices with no justification of costs.
question
Pure Monopoly (Regulated)
answer
Characteristics:
Regulated or Natural Monopolies (Utilities)
Some control over price
Inelastic Demand
Long Run:Normal Profits
Relatively low prices
question
Monopolistic Competition (Small Businesses)
answer
Characteristics:
Large number of firms
Different products
Some control over price within limits
Easy entry and easy exit
Lots of advertising
Semi-Elastic Demand
Long Run: Normal profits
Medium prices and output
Good location equals economic profits
No long run profits to research and development
Secret Weapon: The Garage
question
Oligopoly (Big Businesses)
answer
Characteristics:
A few firms ; less than 20 natiowide
Both standardized and different products
Control over price limited with interdependence; Considerable with collusion
1 major obstacle to entry: A large amount of capital needed
Lots of advertising and gimmicks
Kinked demand curve
Long Run: Economic Profits
Medium prices and output
Long run profits for research and development
Firms sometimes collude:
Firms coming together to agree to charge on hihg price to all consumers.
question
At what point (output level) do the firms in each industry maximize their profits?
answer
MC=MR
question
What kind of output levels/prices exist in each industry ?
answer
High: PC
Medium: O, MC
Low: PM
question
How much control do they have over their prices?
answer
None: PC
Some: MC, O
Absolute: PM
question
How efficient are each of these industries?
answer
Most Efficient: PC
Second Most Efficient: MC
Second Most Inefficient: O
Most Inefficient: PM
question
What kind of profits (normal, economic, or losses) do the firms in these industries make?
answer
Short Run: Any of the 3 all industries
Normal: PC and MC
Economic: PM and O
question
Which industries use a lot of (or little) advertising?
answer
Advertising: MC and O
Research and Development: O, MC
question
Which types of firms are most likely to get involved in price discrimination? Collusion?
answer
Price Discrimination: PM
Collusion: O
question
What is similar to among the fours industry models?
answer
All cost curves are U shaped
All want to produce at MC=MR
Fixed costs can change in the short run
In the short run, profits can be economic, normal or loss
question
What is most different among the four industry models?
answer
Demand is different in all 4 industries
This leads to different output levels
For firms MC and O are between the price and output of PC and PM
question
In general, did U.S. industries become more competitive or more concentrated from 1900 to 1990?
answer
Concentrated
question
How is industry concentration measured numerically by Concentration Ratios of the Herfindahl Index?
answer
Concentration Ratio: Add up 4 to 8 of the largest market shares.
Herfindahl Index: Sum of the squares of the market shares of all firms in an industry
question
The concentration of U.S. industry 1900 to 1990 can also be assessed historically from our waves of heavy merger activity. What are the types of mergers that occurred during these four waves?
answer
Horizontal
Vertical
Conglomerate
question
What major Antitrust laws exist to help protect consumers against potential abuses of firms in concentrated industries?
answer
The Sherman Act
The Clayton Act
The Federal Trade Commission Act
The Celler-Kefauver Antimerger Act
1 of 23
question
What are the legal types of businesses in our economy?
answer
Sole Proprietorship
Partnership
Corporation
Cooperation
question
Which ones are the most influential in terms of revenues?
answer
Corporation
Partnership
Sole Proprietorship
Cooperative
question
% of total U.S. firms
answer
Sole Proprietorship-71%
Partnership-10%
Corporation-19%
Cooperative- < 1%
question
% of Bus. Receipts
answer
Sole Proprietorship- 4%
Partnership-15%
Corporation-81%
Cooperative-<1%
question
What are the four industry models used to analyze American Industry?
answer
Pure Competition
Pure Monopoly
Monopolistic Competition
Oligopoly
question
Pure Competition (Farms, Ranches)
answer
Characteristics:
Large number of firms
Standardized products
Price Takers
Easy Entry
Perfectly Elastic Demand
Long Run(LR): Normal Profits
High Output
Low Prices
Most efficient industry
No LR profits for research and development
question
Pure Monopoly (unregulated)
answer
Characteristics:
One firm with 90 percent or more of market share
Unregulated (Ticketmaster, DeBeers)
Unique products
Price Makers
Blocked Entry
Inelastic Demand
Long Run: Economic Profits
Low or restricted output
High prices
Most inefficient industry
LR profits enough for research and development
Commit price discrimination:
Charging 2 consumers 2 different prices with no justification of costs.
question
Pure Monopoly (Regulated)
answer
Characteristics:
Regulated or Natural Monopolies (Utilities)
Some control over price
Inelastic Demand
Long Run:Normal Profits
Relatively low prices
question
Monopolistic Competition (Small Businesses)
answer
Characteristics:
Large number of firms
Different products
Some control over price within limits
Easy entry and easy exit
Lots of advertising
Semi-Elastic Demand
Long Run: Normal profits
Medium prices and output
Good location equals economic profits
No long run profits to research and development
Secret Weapon: The Garage
question
Oligopoly (Big Businesses)
answer
Characteristics:
A few firms ; less than 20 natiowide
Both standardized and different products
Control over price limited with interdependence; Considerable with collusion
1 major obstacle to entry: A large amount of capital needed
Lots of advertising and gimmicks
Kinked demand curve
Long Run: Economic Profits
Medium prices and output
Long run profits for research and development
Firms sometimes collude:
Firms coming together to agree to charge on hihg price to all consumers.
question
At what point (output level) do the firms in each industry maximize their profits?
answer
MC=MR
question
What kind of output levels/prices exist in each industry ?
answer
High: PC
Medium: O, MC
Low: PM
question
How much control do they have over their prices?
answer
None: PC
Some: MC, O
Absolute: PM
question
How efficient are each of these industries?
answer
Most Efficient: PC
Second Most Efficient: MC
Second Most Inefficient: O
Most Inefficient: PM
question
What kind of profits (normal, economic, or losses) do the firms in these industries make?
answer
Short Run: Any of the 3 all industries
Normal: PC and MC
Economic: PM and O
question
Which industries use a lot of (or little) advertising?
answer
Advertising: MC and O
Research and Development: O, MC
question
Which types of firms are most likely to get involved in price discrimination? Collusion?
answer
Price Discrimination: PM
Collusion: O
question
What is similar to among the fours industry models?
answer
All cost curves are U shaped
All want to produce at MC=MR
Fixed costs can change in the short run
In the short run, profits can be economic, normal or loss
question
What is most different among the four industry models?
answer
Demand is different in all 4 industries
This leads to different output levels
For firms MC and O are between the price and output of PC and PM
question
In general, did U.S. industries become more competitive or more concentrated from 1900 to 1990?
answer
Concentrated
question
How is industry concentration measured numerically by Concentration Ratios of the Herfindahl Index?
answer
Concentration Ratio: Add up 4 to 8 of the largest market shares.
Herfindahl Index: Sum of the squares of the market shares of all firms in an industry
question
The concentration of U.S. industry 1900 to 1990 can also be assessed historically from our waves of heavy merger activity. What are the types of mergers that occurred during these four waves?
answer
Horizontal
Vertical
Conglomerate
question
What major Antitrust laws exist to help protect consumers against potential abuses of firms in concentrated industries?
answer
The Sherman Act
The Clayton Act
The Federal Trade Commission Act
The Celler-Kefauver Antimerger Act

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