econ 212 e3 – Flashcards
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barriers to entry in an industry
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a patent, governmental restrictions, economies of scales
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When a business offers its customers bulk discounts they are practicing
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second degree price discrimination
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at movie theaters, lower prices are charged for matinees than for evening showing for the same film. the customer attending the matinees have
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higher elasticity of demand than customers attending the evening showings
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___ in an industry can be so large that demand will support only one firm
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economies of scale
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the demand curve for a monoplist
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the industry demand curve
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relationship between a firms demand curve under perfect competition and monopoly?
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under perfect competition, the demand cure is perfectly elastic; under monoply the demand curve is eleastic, unit elastic, and inelastic proportions
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a deadweight lost
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is the same as welfare loss
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an example of x inefficiency is
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executive, corporate expense, hiring a limousine to travel one black when ever it rains
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an unregulated natural monoplist would produce to the point at which
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MR=MC
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if the public utility commission allows the water company to earn a normal profit then it is enforcing
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average cost pricing rule
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conditions necessary for price discrimination
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the product must be durable good
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the industrial structure of cartels is an example of a
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cooperative game
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what characteristics do monopolistically competitive markets and perfectly competitive markets not share
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differentiated products
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what following actions help increase the stability of a cartel
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increasing government protection
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in oligopoly all the firms
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take their competitors into account when making pricing decisions
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if wages increase at a 5% rate and the quantity demanded of labor decreases 10% the elasticity of demand for labor is
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2
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robotic manufacuting made labor demand for factory workers
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more elastic
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when the individual labor supply cure is positively sloped the __ effect dominated and higher wages lead to __ hours worked
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substitution; more
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derived demand suggest that
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labor demand is derived from demand for the product it produces
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if price of diesel fuel increases the mrp curve for truck drivers will
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shift to the left
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industrial agglomeration occurs because of which economic phenomenon
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economies of scale
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a firm will invest in additional capital goods as long as the
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MRPk exceeds the interest rate
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forgoing paid employment to obtain a university degree is a
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opportunity cost
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economic rent is the payment to which factor of production
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land
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academic studies have found that economic returns to education are
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large and positive
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discovery of natural gas is the american midwest should lead to a __ in the price of land because of a __ of land
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increase; increase in demand
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profits are best described as the rewards that are earned for
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combining resources and assuming risk to produce products
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the goal of investment in human capital is to increase labors
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productivity
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bonds are best described as a type of
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debt capital
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in economics the rewards earned by entrepreneurship are called
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profits
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characteristics of monopoly
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one firm, no close substitutes for product, significant barriers to entry, potential long run economic profits substantial market power and control over price.
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monopoly barriers to entry
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control of a key input of production, economies of scale (large fixed cost), government protection with patents and copy rights
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under conditions of monoply
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the price will be higher and output will be lower
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rent seeking
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costly actions taken to avoid or limit competition
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x inefficiency
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occurs when monopolies squander- lavish things and perks
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conditions for price discrimination
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must have some control over price, must be able to separate the market into groups based on elasticities of demand, must prevent reselling
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1st degree price discrimination
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negotiation markets, car sales
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2nd degree price discrimination
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charging different prices based on the quantity purchased, sams club, bulk pricing
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3rd degree price discrimination
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charging different prices to different groups of consumers with varying elasticities elastic-lower price, inelastic-higher price
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monopolistic competition
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many buyers and sellers, differentiated products, no barriers to market entry or exit, no long run economic profits, some control over price
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product differentiation
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key to monopolistic competition giving it some control over price
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monopolistic competition demand curve
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downward sloping and relatively flat- elastic
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characteristics of oligopoly
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relative firms more than 1 less than many, interdependent decision making, homogenous, differentiated, substantial barriers to market entry, potential for long run economic profits, shared market power and considerable control over price
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cartels
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reduce overall supply to raise prices and profits and act like monopolies
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cartels are stable when
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they have few members and have similar goals, maintained with legal provisions, unable to differentiate their products, have similar cost structure, significant barriers to entry
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kinked demand curve
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if a firm raises its price it competitors will not follow cuasing a sharp decrease in quantity demanded, if a firm lowers its price competitors follow resulting in only a small increase in quantity demanded
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competitive labor market aussmptions
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firms operate in competitive industries with many buyers and sellers, homogeneous product and easy entry and exit, all workers are regarded as equally productive, information in the industry is widely available and accurate
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substitution effect
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workers choose more hours as wages rise
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income effect
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workers choose fewer hours when wages rise and more hour when wages fall.
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shifts of labor supply
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demographic changes, aspects of jobs other than money, wages in alternative jobs, nonwage income
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shifts of labor demand
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a change in demand for the product, change in productivity, change in the price of other goods
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factors of production
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land, labor, capital, ideas
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the supply of land
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perfectly inelastic, supply of land is fixed and rent is determined by demand, when demand increases rent rises and vice versa
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industrial agglomeration
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occurs when firms locate close to eachother to take advantage of external economies of scale
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bond
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debt instrument that promises to payback a certain amount over time
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stock
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shares of ownership in a company provides voting rights and profit sharing
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venture capital
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investment in start up companies with potentially profitable ideas
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private equity
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investment in struggling firms in an attempt to turn around the company for profit
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demand for investment in human capital
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demand curve slopes down cus diminishing returns for more education, more time in school leaves less time to earn money
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supply for investable funds
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positively sloped because students use the lowest cost fund first
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patent
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protect inventions
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copy rights
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protects writing, music, and other creative works
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trademark
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protects company names and logos
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industrial design rights
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protect design of products
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market failures
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externalities, public goods, common property resources
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externalities
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an action or transaction that affects a third party who is no involved
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positive externalities
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producing benefits to others ex keeping lawn neat
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negative externalities
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producing a cost to others ex loud house party
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marginal private cost
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producers individual cost
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marginal social cots
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producers individual cost and cost to society
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nonrivalry
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consumption by one does not reduce that good or services utility to others
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nonexcludablility
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once a good or service is provided, it is not possible to exclude others from enjoying it
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solutions to common property
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establishing private property rights, using government policy to restrict, informal organization that restrict each users benefits from the resource
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over use of common property
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leads to tragedy of the commons
