Chapter 14 Econ – Flashcards
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when a firm produces less than efficient scale
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Efficient Scale
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which is the quantity at which average total cost is a minimum
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Excess capacity
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amount by which price exceeds marginal cost
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Markup
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market structure in which -a large number of firms compete -each firm produces a differentiated product -firms compete on product quality, price, and marketing -firms are free to enter and exit the industry
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Monopolistic competition
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when a product that is slightly different from the products of competiting firms
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product differentiation
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acion taken by informed person (or firm) to send a message to uninformed people
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signal
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regulation
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Rules administered by a government agency to influence economic activity by determining prices, product standards and types, and the conditions under which new firms may enter an industry is known as
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number of voters benefited.
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All of the following affect the demand for regulation except
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capture theory.
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The idea that regulations are supplied to satisfy the self-interest of producers to maximize their economic profit is known as
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rate of return regulation.
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Regulation that requires the firm to justify its price by showing that the price enables it to earn a specified target percent return on its capital is
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total surplus
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A marginal cost pricing rule maximizes _____________ in the regulated industry.
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earns a normal profit; is
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When a natural monopoly is regulated using an average cost pricing rule, the firm ____ and there ____ a deadweight loss
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price cap regulation.
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One type of regulation that specifies the highest price the firm is permitted to set and gives the firm an incentive to operate efficiently and keep costs under control is
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always illegal under the Sherman Act.
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If two firms agree to fix their prices, the agreement is
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Sherman Act of 1890.
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The law that makes an act of conspiring with others to restrict competition illegal is the
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sometimes illegal under the Clayton Act
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A contract that prevents a firm from selling competing products is
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both have MR curves that lie below their demand curves
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a monopolistically competitive firm is like a monopoly firm insofar as
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neither is protected by high barriers to entry
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a monopolistically competitive firm is like a perfectly competitive firm insofar as
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-means that monopolistically competitive firms can compete on quality and marketing -occurs when a firm makes a product that is slightly different from that of its competitors -make a monopolistically competitive firms demand curve downward sloping
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product differentiation:
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quantity
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monopolistically competitive firms compete on all the following execrpt
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downward sloping, downward sloping
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taco bell is monopolistically competitive firm. taco bells demand curve is ____ and its marginal revenue curve is ______
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long run the firm does not produce at the minimum average total cost
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a monopolistically competitive firm has excess capacity because in the
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the lack of barriers to entry
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In the long run, a monopolistically competitive firms economic profit is zero because of
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increase demand for their priduct
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monopolistically competitive firms constantly develop new products in an effort to
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both marginal revenue and marginal cost of product development
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when deciding upon how much to spend on product development,a firm will consider
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they have high selling costs
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which of the following statements about monopolistically competitive firms is correct
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zero economic profit.
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In monopolistic competition, because there is free entry and free exit in the industry, in the long run, a firm earns
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marginal revenue equals its marginal cost.
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To maximize its profit, a firm in monopolistic competition produces so that its
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average total cost but exceeds marginal cost.
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In the long run, a monopolistically competitive firm produces an amount of output at which price equals
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neither the price nor the quantity produced by the firm
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In the kinked demand curve model, ____ will likely change when there is a small change in cost.
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dominant firm oligopoly.
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A model in which one firm acts like a monopoly and the other firms act like perfectly competitive firms is the
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payoff matrix.
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In a game, a table that shows the consequences for every possible action by each player for every possible action by each other player is called the
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neither firm complying with the collusive agreement and neither firm earning an economic profit.
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An agreement between two (or more) producers to restrict output, raise the price, and increase profits is a
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makes; more
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In a repeated game, a tit-for-tat strategy ____ the cooperative equilibrium more likely, which makes it ____ likely for the firms to earn an economic profit.
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limit pricing.
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A strategy in a contestable market to set the price at the highest level that inflicts a loss on the entrants into the market is called
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a competitive industry has a large number of firms
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monopolistic competition is similar to perfect competition because there are a large number of firms in both market structures
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by making its product different from those of its competitors, each monopolistically competitive firm has a unique produce and hence a down ward sloping demand curve
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product differentiation gives each monopolistically competitive firm a downward sloping demand curve
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because its product us differentated, monopolistically competitive firms compete on product quality and marketing as well as on price
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monopolistically competitive firms use the same rule as all firms, to maximize their profit, produce so that MR equals MC
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by producing the quantity that sets MR=MC, a firm maximizes its profit
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the firms cannot make an economic profit in the long run because there are no barriers to entry
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monopolistically competitive firms have excess capacity because they produce differentiated goods
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the firm sets MR=MC be because P>MR, ir is the case that P >MC. The difference between P and MC is the mark up
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In monopolistic competition price exceeds marginal cost
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the increased product variety from monopolistic competition is a benefit of monopolistic competition relative to perfect competition
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monopolistic competition leads to more product variety than perfect competition
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monopolistically competitive firms constantly try to further differentiate their products and develop new products is one method they use
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a monopolistically competitive can make an economic profit if it develops new products
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if firms advertise, then the demand for each firms product can be more elastic, which reduces a firms makeup
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advertising can be used to signal to consumers that the product is high quality
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advertising can signal product qualitity
