Econ 202 Chpt 14-16 – Flashcards
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Arbitrage by buyers
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A firms effort to increase profit by price discrimination
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According to the law of one price
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if transaction costs are zero, identical goods should sell for the same price everywhere
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Harry sold baseball cards where he knew they would sell for more. So the profits he earned are
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Arbitrage profits
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if a monopolost practices perfect price discrimination
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consumer surplus will be zero
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Suppliers will charge a higher price to those people who have a
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low price elasticity
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electronic products are introduced at high prices then tend to fall over time. what causes this?
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after satisfying deman for early adopters, firms lower price to attract the more price sensitive customers
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Walt Disney World charges different customers different prices for admission. This is an example of
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price discrimination
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Transaction costs refer to
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costs in time and other resources that parties incur in the process of agreeing to and carrying out an exchange of goods or services
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Law of one price
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identical products should sell for the same price everywhere
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Yield management and price discrimination have enabled firms to increase profits and, at the same time
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capture some consumer surplus
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Yield management is the practice of
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using buyer data to rapidly adjust prices
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A monopoly firms demand curve
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is the same as the market demand curve
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compared to a monopolistic competitor, a monopolist faces
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a more inelastic demand curve
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If a theatre company expects 250000 in ticket revenue from five performances and 288000 in revenue if it adds the 6th performance
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the marginal revenue of the 6th perf. is 38000
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Network externalities
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exist when the usefulness of a product increases with the number of consumers who use it
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the only firms that do not have market power are
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firms in perfectly competitive markets
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To be a natural monopoly a firm must
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have economies of scale that are so large that it can supply the entire market at a lower cost than two or more firms
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A firm would have a monopoly if
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there is no other firm selling a substitute for its product close enough that its economic profits are competed away in the long run
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A four firm concentration ratio measures
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the extent to which industry sales are concentrated among the four largest firms in the industry
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A patent is a gov't imposed entry barrier because
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it gives a firm the exclusive right to a new product for a period of 20 years from the date the product is invented
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A table that shows possible patoffs
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Payoff Matrix
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As word processing on personal computers expanded, sales of typewriters bagan to disappear. Which of Porters competitive forces does this demonstrate?
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competition from substitute goods or services
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Patents, Tariffs and quotas are all eamples of
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Government Imposed barriers
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Sequential games are used to analyze
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situations in which one firm acts and other firms respond
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the study of how people make decisions in situations in which attaining their goals depends on their interactions with others is called
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game theory
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What is the dominant strategy in a second price auction?
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Bidding ones true value
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Which of the following is not among porters competitive forces?
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Changing consumer tastes
