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Stack #4581857
MicroEcon Test 3
| Question | Answer |
|---|---|
| Price Discrimination | selling a given product at more than one price, with the difference being unrelated to the differences in cost |
| Price Discrimination Necessary Condition | buyers must have different price elasticities of demand |
| Price Discrimination Necessary Condition | the firm must be able to prevent resale of the product or service |
| Price Discrimination | gets us closer to the socially optimal quantity, increases economic efficiency |
| Perfectly Competitive Markets | many sellers, similar products, free entry and exit |
| Monopolistic Competition | many sellers, differentiated products, low barriers to entry and exit |
| Monopolistically Competitive Markets | how well the brand succeeds determines the profitability of the similar items |
| Advertising | shifts the demand curve to the left |
| A flipped coin shows heads 5x in a row. Bob feels certain the 6th flip will land tails. Bob's thinking is an example of: | the gambler's fallacy |
| positive time preferences tells us that people value ______ consumption | current over future |
| A bank has a new commercial that shows an older person facing bankruptcy to encourage current savings rates. This is: | a nudge |
| The ultimatum game shows that people care about | fairness of playoffs |
| loss aversion tends to cause people to | ignore wins completely and only focus on the negative effects of losses, behave too conservatively and not take enough risks. |
| Which of the following statements is true about risks, risk-taking, and risk preference? | risk preferences vary among different people |
| Monopolistic Competition | many firms with some product variety but low barriers of entry |
| In Monopolistic Competition | firms engage in advertising |
| In Monopolistic Competition | each firm produces a differentiated product |
| In Monopolistic Competition | there is easy entry and exit in the long run |
| in the long run, in monopolistic competition there can be | NO economic profits or losses |
| Which of the following is true about monopolistic competition? | it results in higher prices than perfect competition |
| What is true about the long-run equilibrium for firms in a monopolistically competitive industry? | P = ATC, P > MC, P > min(ATC) |
| Tom buys an economy ticket for $400. On the same flight, Anne buys a first-class ticket for $800 | this is NOT price discrimination |
| when a firm perfectly price discriminates, it causes | more units to be sold, compared to when a single-price is charged. |
| If a firm can identify your exact willingness to pay this is | 1st degree price discrimination |
| Perfectly Price Discriminates | where the MC intersects the Demand curve |
| Single Price | go to where the MR=MC and move up to the demand curve |
| Price Discrimination | INCREASES economic efficiency |
| Product Differentiation occurs when a business | makes a product which STANDS OUT from the competition |
| Product Differentiation | more differentiation leads to GREATER DIFFERENCES IN price |
| How might advertising lead to a shift in the demand curve? | by increasing awareness and making demand more inelastic |
| Little brand loyalty and a lack of significant differentiation means the mark up is | SMALL |
| Advertising _____ the firms LRATC | SHIFTS |
| Frank gets 12u from pork and 18u from eggs. If the P pork is $9, what would he pay for eggs? | 12/$9 = 18/$x or $13.50 |
| When Total Utility is rising at a decreasing rate | Marginal Utility is DECLINING |
| If there is a 10% price reduction in the price of a Kia Soul this creates | a substitution and real-income effect |
| When an indifference curve shifts to the right (2,1) to (4,2) IN THE L SHAPE | the goods are COMPLEMENTS |
| when indifference curves are diagonal lines shifting right | they are SUBSTITUTES |
| Which of these is an example of a negative-sum game? | CLIMATE CHANGE |
| Which of these is an example of a negative-sum game? | picking the best individual payoff |
| What does the prisoner's dilemma explain? | why two completely rational individuals might not cooperate |
| In the prisoner's dilemma | The Pareto-efficient outcome is not achieved, because it is one-off, non-cooperative decision. In a repeating (long-run) game, a cooperative solution (like keeping prices high) could possibly be obtained. |
| How can a Nash equilibrium be accurately described? | it’s an outcome in which neither player wants to change strategies. |
| a dominant strategy is the one a player will choose | regardless of what the other player chooses. Here, the top left is the Nash Equilibrium because neither player has an incentive to change their strategy given the strategy the other player is currently doing! |
| Predatory pricing occurs when the price is | Less than Average VARIABLE cost |
| In a long-run cooperative game the best strategy is to | copycat (TIT-FOR-TAT) |
| Behavioral Economics | a field of economics that studies psychological influences in economic decision making |
| misperceptions of probabilities | occur when the true underlying probability is misestimated |
| Gambler's Fallacy | the belief that outcomes that HAVE NOT occurred recently are MORE LIKELY to occur. That is a NEGATIVE correlation |
| Hot Hand Fallacy | the belief that outcomes that HAVE occurred recently are more likely to occur. That is a POSITIVE correlation |
| Intertemporal Choice | how an individual's current decisions affect what options become available in the future |
| Intertemporal Choice | planning to do something over a period of time requires the ability to value the present and future consistently |
| Nudge | prompts the consumer to consider the long-run consequences of their actions |
| Framing | occurs when an answer is influenced by the way a equation is asked, or a decision is influenced by the way alternatives are presented |
| Example of Framing | 91% fat free or 9% fat |
| Status-Quo Bias | tendency to keep doing whatever you are currently doing |
| Priming | you can prime people by giving them a default choice, like making the default that you are/are not an organ donor |
| Example of Calculating Expected Value: You receive $100 with a 40% probability and $20 with a 60% probability | EV= 0.4 x ($100) + 0.6 x ($20) = $52 |
| Risk-Averse Person | prefers a CERTAIN PAYOFF to gamble with a higher expected value |
| Risk-Neutral Person | chooses the HIGHEST EXPECTED VALUE regardless of the risk |
| Risk-Loving (Risk-Taking) Person | prefers gambling with LOWER EXPECTED VALUES BUT POTENTIALLY HIGHER WINNINGS over a certain payoff |
| Risk-Averse Example: Coin-flip game: • Heads: You win $100. • Tails: You get nothing. EV of game = .5 x 100 + .5 x 0 = $50 | A risk-averse person would take a guaranteed payoff < $50 rather than play |
| Risk-Averse Example: Coin-flip game: • Heads: You win $100. • Tails: You get nothing. EV of game = .5 x 100 + .5 x 0 = $50 How much guaranteed money would it take you to not play the game? | If you offer $35 or the chance to play: will likely take $35 even though $35 < $50 |
| Risk-Neutral Example: Coin-flip game: • Heads: You win $100. • Tails: You get nothing. EV of game = .5 x 100 + .5 x 0 = $50 | A risk-neutral person would require a guaranteed payoff of > = $50 to choose not to play |
| Risk-Neutral Example: Coin-flip game: • Heads: You win $100. • Tails: You get nothing. EV of game = .5 x 100 + .5 x 0 = $50 How much guaranteed money would it take you to not play the game? | • Indifferent between playing and guaranteed $50. • Any guaranteed offer > $50 would cause the person to take the offer and not play. |
| Risk-Taker Example: Coin-flip game: • Heads: You win $100. • Tails: You get nothing. EV of game = .5 x 100 + .5 x 0 = $50 | A risk-loving person would take a guaranteed payoff > $50 to choose not to play. |
| Risk-Taker Example: Coin-flip game: • Heads: You win $100. • Tails: You get nothing. EV of game = .5 x 100 + .5 x 0 = $50 How much guaranteed money would it take you to not play the game? | • Could offer to play or get a guaranteed $60. • Depending on level of risk loving, may rather play over taking the $60, even though $60 is greater than the EV |
| Regret Aversion | when people fear that their decision will turn out to be wrong in hindsight, they exhibit regret aversion |
| The Allais Paradox | is a choice problem designed to show an inconsistency of actual observed choices with the predictions of utility theory |
| Preference Reversal | occurs when people's risk tolerance is not consistent |
| Risk tolerance depends on | financial circumstances |
| Risk-Taking Individuals | are more likely to participate in large-prize games such as lotteries (large prizes= significant life change) |
| Prospect Theory | people weigh the utilities and risks of gains and losses differently |
| Prospect Theory | • Individuals place more emphasis on losses than gains. |
| Prospect Theory | • Implies that people evaluate the risks that lead to gains separately from the risks that lead to losses |
| Loss Aversion | people dislike losing more than they enjoy gains |
| Utility | satisfaction or well-being that a consumer receives from consuming a good or service |
| Utility | is subjective |
| Utility Theory | total utility is overall happiness from consumption- generally prefer more to less |
| Marginal Utility Calculation | change in total utility/change in the number of units consumed |
| contentment | is hard to measure |
| happiness | is a balance between economic and personal factors |
| The Law of Diminishing Marginal Utility | states that the more we have of something, the less marginal utility each unit of that good brings us |
| How to maximize utility | Marginal Utility / Price is equal for each item, and a person does not spend more than the budget constraint |
| How to calculate Utility Per Dollar spent (using pepsi and coke as an example) | marginal utility of pepsi / price of pepsi compared to marginal utility of tacos / price of tacos |
| Indifference Curves | More is better |
| Indifference Curves | trace out combinations of goods and services among which consumers are indifferent (the combinations of goods and services that yield the same level of utility) |
| Maximization Point | the "bullseye" |
| Indifference Curves: Maximization Point | interested only in the quadrant where BOTH ARE ECONOMIC GOODS |
| Marginal Rate of Substitution | MRS= MU1 / MU2 |
| Marginal Rate of Substitution | at any point along an indifference curve is the value of the slope and the indifference curve at that point |
| Marginal Rate of Substitution | the amount of the good on the y-axis the consumer is willing to give up compensating for the gain of 1 unit of the good on the x-axis |
| Marginal Rate of Substitution on an Indifference Curve | an indifference curve represents different consumption points for which a consumer is indifferent: same utility |
| When there is a lot of a good on the Y axis | the marginal utility is LOW |
| When there is a small amount of a good on the X axis | the marginal utility is HIGH |
| Indifference Curves | cannot be thick, because it would be impossible to draw 2 points inside an indifference curve where 1 point is preferred to the other |
| Indifference Curves | CANNOT cross |
| Perfect Substitutes | two goods are perfect substitutes for a consumer if the consumer would always be willing to give up one unit of one good for a fixed number of units of the other good and keep their utilities fixed (looks like a shifting demand curve) |
| Perfect Complements | two goods are perfect complements for a consumer if the consumer consumes the good in fixed proportion (looks like an L moving to the right) |
| Slope of a BC (MARGINAL COST) | shows us how much of the good on the y-axis we MUST give up if we want another unit of the good on the x-axis (marginal cost) |
| Slope of an IC (MARGINAL BENEFIT) | tells us how much of the good on the y-axis we are WILLING to give up if we want another unit of the good on the x-axis (marginal benefit) |
| Maximization Point Ray | illustrates where the consumer optimum tangent points would be at all possible income levels (without changing prices) |
| Highest Utility according to budget point on Budget Constraint line | the point touching the budget constraint line in the middle of the curve |
| Substitution Effect | occurs when consumers shift away from goods and services that become relatively high priced in favor of goods and services that are now lower priced |
| Real-Income Effect | the change in people's purchasing power that occurs when, other things being constant, the price of one good that they purchase changes |
| Real-Income Effect Matters..... | if the price change is ENOUGH TO CAUSE A MEASURABLE DIFFERENCE ON PURCHASING POWER |
| Perfect Competition | MANY sellers, SAME product, FREE entry and exit |
| Oligopoly | FEW sellers, DIFFERENTIATED products, SIGNIFICANT barriers to entry |
| Monopoly | ONE seller, UNIQUE product without close substitutes, SIGNIFICANT barriers to entry |
| Negative-Sum Game | a game in which players as a group lose at the end of the game (riots, nuclear war, cimate change) |
| Zero-Sum Game | a game in which any gains within the group are exactly offset by equal losses by the end of the game (sporting events) |
| Positive-Sum Game | a game in which players as a group are better off at the end of the game (trade) |
| The Prisoner's Dilemma | a one-off game where both players must simultaneously make a decision without cooperation |
| Examples of Prisoner's Dilemma | standing at a game or concert, tipping at an out-of-town restaurant, shouting at parties |
| Nash Equilibrium | occurs at a point at which neither player can do better by changing their strategy while the other player's strategy remains unchanged |
| Tit-for-Tat | one agent cooperates with another agent in the very first interaction and then mimics their subsequent moves |
| Tit-for-Tat | dominant strategy in the long-run for encouraging cooperative behavior |
| Network Externalities | when the number of customers who purchase or use a product influences the quantity demanded |
| Predatory Pricing Laws | prevent firms from setting prices below the Average Variable Cost with the intent of driving rivals from the market |
| Perfectly Competitive Markets | MANY sellers, SIMILAR products, FREE entry and exit |
| Monopolistic Competition | MANY sellers, DIFFERENTIATED products, LOW barriers to entry and exit |
| Advertising | approach captures attention and increases demand |
| Advertising | increases costs, increases long run average total costs |
| Long Run of Monopolistic Competitor's Price and Output | with free entry and exit, competition will eventually drive prices down to the level of the Average Total Cost |
| Long Run of Monopolistic Competitor's Price and Output | when profits (LOSSES) are present, the demand curve will shift inward (OUTWARD) until the zero-profit equilibrium is restored |
| Long Run of Monopolistic Competitor's Price and Output | the price searcher establishes its output level where MC=MR |
| Long Run of Monopolistic Competitor's Price and Output | at Q, the average total cost is equal to the market price. Zero economic profit is present. There is NO tendency for firms to either enter or exit the market |
| Perfect Competition and Monopolistic Competition | P=ATC and ECONOMIC profits are equal to ZERO |
| Perfect Competition and Monopolistic Competition | have the same cost structure, but the price in the PRICE-SEARCHER market is higher than that of the PRICE TAKER |
| Product Differentiation | premium society pays for variety and convenience |
| Price Discrepancy | SIGN OF INEFFICIENCY |
| Perfectly Competitive Markets | Can earn economic profits in the short run |
| Perfectly Competitive Markets | Cannot earn economic profits in the long run |
| Perfectly Competitive Markets | price TAKER |
| Perfectly Competitive Markets | does NOT advertise |
| Perfectly Competitive Markets | ACHIEVES efficiency |
| Perfectly Competitive Markets | NO market power |
| Perfectly Competitive Markets | NO excess capacity |
| Perfectly Competitive Markets | NO markup |
| Monopolistic Competition | CAN earn economic profits in the short run |
| Monopolistic Competition | CANNOT earn economic profits in the long run |
| Monopolistic Competition | Price MAKER |
| Monopolistic Competition | advertises regularly |
| Monopolistic Competition | DOES NOT achieve efficiency |
| Monopolistic Competition | SOME market power |
| Monopolistic Competition | SOME excess capacity |
| Monopolistic Competition | SOME markup |
| Monopoly | Can earn economic profits in the long run |
| Monopoly | CAN earn economic profits in the long run |
| Monopoly | price MAKER |
| Monopoly | Does SOME advertising |
| Monopoly | DOES NOT achieve efficiency |
| Monopoly | SIGNIFICANT market power |
| Monopoly | SIGNIFICANT excess capacity |
| Monopoly | SIGNIFICANT markup |
| According to behavioral economics, the participation rate will be about the same whether people are given an easy enrollment form to fill out or are enrolled automatically but given an easy opt-out form to complete if they don’t want to participate | FALSE |
| Two people are playing an ultimatum game with $100. If Player 2 accepts, money is split to Player 1’s offer. If Player 2 rejects, neither of them get money. Player 1 offers $2 to Player 2. What does TRADITIONAL ECONOMIC THEORY say Player 2 will do? | Player 2 will ACCEPT because $2 is better than nothing |
| flipped coin lands on heads five times in row. Jaime believes the sixth flip will almost certainly land tails. Jaime is showing an example of: | the GAMBLERS fallacy |
| What is an explanation for bounded rationality (also called limited reasoning)? | people often have INCOMPLETE information and LIMITED decision-making time |
| Loss-aversion tends to cause people to: | behave too conservatively and not take enough risks |
| The ultimatum game shows that people care about: | FAIRNESS of payoffs |
| What is true about risks, risk-taking, and risk preference? | Risk preferences vary among different people |
| US Treasury Department trying to introduce a $1 coin have met strong public resistance. The public simply won’t carry the $1 coin around even though it would save the government billions of dollars. What concept from behavioral economics explains this? | the STATUS QUO bias |
| The following question, “Would you rather have a 20% chance of mortality or an 80% chance of survival?” is an example of | FRAMING |
| The Allais Paradox is famous because it shows | preference reversals |
| When the Cookie Monster tries to resist eating a cookie this is about | intertemporal decision making |
| Behavioral Economics Explains | why people are predictably irrational |
| When contestants are offered the opportunity to switch their choice on Let’s Make a Deal, but choose not to switch this can be explained by | MISPERCEPTIONS of probability |
| You take a multiple-choice exam and notice that you have not answered A for the first 20 questions, so you decide it is long overdue and answer A on #21, you are exhibiting | the GAMBLERS fallacy |
| Why is the price of water so much lower than the price of diamonds even though people cannot survive long without water? | Marginal utility, not total utility, determines how much a person is willing to pay for a good. |
| A new restaurant offers an all-you-can-eat buffet for $9.99. What economic concept is this business relying on to earn a profit? | DIMINISHING marginal utility |
| Tina enjoys fresh produce. If Tina gets more utility per dollar spent (Hint: think of the equal marginal principle) from broccoli than from tomatoes she should | EAT more broccoli |
| If the price of a pack of a certain brand of gum goes up by 50 cents, this creates | a SUBSTITUTION effect |
| Which is the best example of a zero-sum game? | playing poker |
| In the prisoner’s dilemma which outcome is the dominant strategy? | rat out your partner to avoid jail time |
| What is the dominant strategy in Rock, Paper, Scissors? | RPS does not have a dominant strategy |
| Which of the following is the best example of a zero-sum game? | your laptop gets stolen |
| Which is the best example of an oligopoly? | Coke and Pepsi |
| Oligopoly | market dominated by TWO TO FOUR firms producing 70%-80% of the output |
| As the owner of a small restaurant should you be more concerned about the cleanliness of your restroom or kitchen? | The dominant strategy is to clean the restrooms more often than the kitchen |
| The Nash equilibrium occurs when | Neither player has an incentive to switch their strategy given what the other player is doing |
| Because consumers have ___________ ____________ about products this leads oligopolies to compare their products to more highly rated brands | INCOMPLETE INFORMATION |
| Which of the following is an example of the prisoner’s dilemma in everyday life? | not leaving a tip at an out-of-town restaurant |
| If you want to encourage someone to cooperate with you in the long run you should | use TIT-FOR-TAT |
| One critical characteristic of monopolistic competition is that | there are MANY small firms in the industry |
| Which of the following is the best example of a firm operating in a monopolistically competitive market? | RETAIL clothing |
| We could state correctly that the minimum characteristic necessary to distinguish among price-making firms is | PRODUCT differentiation |
| In long-run equilibrium for both a competitive market and monopolistic competition | ECONOMIC profit is ZERO |
| f monopolistically competitive firms are incurring losses, existing firms would | LEAVE the industry |
| Profit-maximizing, monopolistically competitive firms | CANNOT be guaranteed an economic profit in any period and MIGHT incur losses |
| Fast-food, bottled water, and cereal markets are all examples of | MONOPOLISTICALLY competitive markets |
| The greeting card industry is | most likely monopolistically competitive and has substantial markups |
| The marginal revenue of a monopolistically competitive firm will always be | LESS than the price |
| In a monopolistically competitive industry, price | is most likely a bit higher than the competitive market price because of the cost of variety |
| Monopolistic competition is inefficient because | price IS NOT equal to the minimum average total cost |
| Advertising is designed to | make the price elasticity of demand for the firm MORE INELASTIC and shift the firms DEMAND CURVE TO THE RIGHT |
| Cost of Monopolistic Competition | long-run production at a point tangent to the average total cost (ATC) curve |
| Cost of Monopolistic Competition | prices set above the marginal costs of production |
| Benefit of Monopolistic Competition | competition based on location |
| Benefit of Monopolistic Competition | increased variety |
| Benefit of Monopolistic Competition | competition based on quality |
| A successful advertising campaign will cause the firm’s demand to | INCREASE |
| The firm's demand curve becomes more | INELASTIC |
| In the short run, a successful advertising campaign will enable the firm to charge a price __________ average costs | GREATER THAN |
| Advertising allows firms to | RAISE THE PRICE because demand is more INELASTIC |
| In the long run, when you compare monopolistic competition with perfect competition, the price charged is ________ and economic profits are ________ | HIGHER; THE SAME |
| What is true about the long-run equilibrium for firms in a monopolistically competitive industry? | P = ATC, P > MC |
| Which of these businesses is in a monopolistically competitive industry? | Domino's Pizza |
| Which of the following is NOT a good example of price discrimination? | Target places all of its leftover Easter candy on 50% clearance |
| Which is the best example of a firm that price discriminates? | Regal Cinemas |
| In order to be able to effectively price discriminate a firm must | have a DOWNWARD-sloping demand curve, be able to PREVENT resale, and identify at least two groups of customers with DIFFERENT elasticities of demand. |
| Where is price discrimination at work? | going to China Buffet for lunch, instead of dinner |
| Which of these is an example of second-degree price discrimination? | a pizza shop offers a buy two, get one free discount when you buy three large pies |
| When an airline price discriminates, this leads to | MORE customers flying |
| For price discrimination to be effective, | The firm must identify at least TWO groups of customers with DIFFERENT elasticities of demand. |
| Price Discrimination | occurs when the same good is sold at different prices to different groups of customers |
| Price Discrimination | company needs to be a price MAKER |
| Price Discrimination | the firm must be able to distinguish groups of buyers with different price elasticities of demand (at least TWO groups), and the firm must be able to prevent resale of the product or service |
| Example of Perfect Price Discrimination | A well-respected golf instructor charges each customer a fee just under the customer’s maximum willingness to pay for lessons |
| Example of Price Discrimination | The public bus line offers unlimited rides on the weekends for all of its customers. |
| Example of Price Discrimination | Student tickets for basketball games are $5 |
| Example of Price Discrimination | A restaurant offers a 20% discount for customers who order dinner between 4 and 6 p.m. |
| Example of Price Discrimination | A bookstore has a half-price sale on last year’s editions. |
| When a firm price-discriminates | it will charge a HIGHER price to consumers who are LESS sensitive to price, or who have a more INELASTIC demand curve |
| The key to determining price discrimination | is determining whether the COSTS for the products are different |
| Price Discrimination | consumers are being charged MORE for the SAME product with NO INCREASE in costs for the firm |
| A ski-resort discriminates | on time, age and ski rental |
| Relatively Elastic | The Jones family travels for a vacation |
| Relatively Elastic | Robert goes to a matinee movie |
| Relatively Inelastic | Jerry buys multiple items (soda, popcorn, candy) from the concession stand at the movie theater |
| Relatively Inelastic | Steve buys all his clothes at his favorite luxury department store |
| Relatively Elastic | refers to a situation where the quantity demanded of a good or service is SIGNIFICANTLY RESPONSIVE to changes in price |
| Relatively Inelastic | refers to a situation where the quantity demanded of a good or service changes only slightly in response to a change in price |
| Relatively Inelastic | consumers will continue to purchase nearly the same amount of product even if the price increases or decreases, indicating that the good is a NECESSITY or LACKS CLOSE SUBSTITUTES |
| Price Elasticity of Demand Coefficient for Relatively Inelastic Demand | typically ranges from 0 to 1 with values closer to 0 indicating greater elasticity |
| A national coffee chain offers a small cup of coffee for $3.79 but charges $2.49 for the same item to senior citizens with a valid senior citizen ID. The company is able to practice price discrimination because it | is able to distinguish between buyers |
| The company charges a lower price to senior citizens because their demand for a small cup of coffee is | MORE price elastic |
| The more time a passenger has to purchase a plane ticket | the MORE price elastic their individual demand |
| The longer the time horizon | the longer a consumer has to search for substitutes and the more elastic a product becomes |
| When monopolists practice perfect price discrimination | they capture the entire consumer surplus, leave no deadweight loss, sell the efficient amount, and charge each consumer a unique price |
| Price Discrimination | increases social welfare, and many customers pay LESS than they would if a firm had charged a single price |
| Perfect Price Discrimination | ELIMINATES consumer surplus |
| Competitive Market | ZERO economic profit in the long run |
| Competitive Market and Perfect Price Discrimination | MAXIMIZE total surplus |
| Total Surplus | the SUM of PRODUCER surplus and CONSUMER surplus |
| Producer Surplus | Easy to determine because marginal cost is CONSTANT |
| Movie theaters charge lower prices for matinees and do not accept coupons for evening showings because | price discrimination increases profits, patrons who attend the night showing have a LOWER price elasticity of demand, patrons who attend the matinee showing have a HIGHER price elasticity of demand |
| Price Elasticity of Demand | measures how sensitive the quantity demanded of a good is to changes in its price, indicating whether the demand is elastic, inelastic or unitary |
| Perfect Competition | Price = Marginal Cost |
| Perfect Competition | Price = Minimum Average Total Cost |
| Perfect Competition | DWL = 0 |
| Monopoly | Price > Marginal Cost |
| Monopoly | Price |
| Monopoly | Profit can be positive in long run |
| Perfect Competition | Profit = 0 |
| Monopoly | DWL > 0 |
| Monopolistic Competition | P>MC |
| Monopolistic Competition | Profit = 0 |
| Monopolistic Competition | Deadweight Loss > 0 |
| Oligopoly | Price > MC |
| Oligopoly | Profit > 0 in long run |
| Oligopoly | Deadweight Loss > 0 |
| Oligopoly | FEW firms |
| Oligopoly | LITTLE product differentiation |
| Oligopoly | Goods are ALMOST IDENTICAL |
| Oligopoly | BARRIERS to entry |
| total revenue = profit | price x quantity |
| WHEN MONOPOLY | go to mr=mc and MOVE UP TO THE DEMAND CURVE |
| perfect competition | price=marginal cost |
| MRSxy | ALWAYS put the horizontal in the numerator (MUx / MUy) |
| Which firm is the oligopolist | Firm B is in the auto rental business. It is not the nation’s largest rental company, but significant barriers to entry enable it to serve customers across the United States more conveniently and at a lower price than local rivals. |
| The domestic airline industry features a number of major airlines but also many smaller rivals. Is this a good example of oligopoly or of monopolistic competition? | Oligopoly |
| The larger the four-firm concentration ratio in an industry | the more market power the four largest firms have |
| To calculate the concentration ratio | add the four largest firms market share togeher |
| If two firms were to exit the market, economists expect the equilibrium price will likely _________ and the equilibrium quantity will likely _________ | INCREASE, DECREASE |
| Examples of Collusion | Two large universities in a state meet and agree to raise their tuition prices |
| Examples of Collusion | The two firms in a small rural town that employ most of the people in that area agree to keep wages low |
| The firm that produces the largest share of output (quantity) | is the price LEADER |
| Each person has a unique, personal scale for reporting utility so ________ | we are not able to compare the amount of happiness or level of enjoyment between any two people |
| Suppose that Austin reports getting 15 utils from watching an episode of MythBusters. Erin reports getting 5 utils from watching the same episode. Which statement is true? | We can’t be sure who liked watching the episode of MythBusters more. |
| When total utility is maximized, marginal utility will be | ZERO |
| Marginal utility is zero when | total utility has reached its maximum value |
| he marginal utility is zero where the total utility | has peaked and is changing from rising to falling |
| The heart associated with each date kept getting smaller and smaller. When should the couple break up? | The couple should stay together as long as the date gives some level of utility and contributes to the total utility of the relationship. |
| marginal utility | the additional amount of utils gained by consuming one more unit |
| marginal utility calculation hack | move down to the next total utility and subtract the total utility by the marginal utility for the next marginal utility blank |
| The total level of utility is obtained by adding the marginal utility | for every unit consumed (EXAMPLE: if on the 3rd row, add up all 3 not just the last number) |
| In consumer equilibrium, Mavis buys four cups of coffee at $1.00 per cup and two egg and cheese bagels at $1.00 per bagel each day. If the price of a cup rises to $4.00, the number of cups of coffee that Mavis buys will | DECREASE |
| In consumer equilibrium, Mavis buys four cups of coffee at $1.00 per cup and two egg and cheese bagels at $1.00 per bagel each day. The number of egg and cheese bagels that she buys will | BE UNCERTAIN |
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sydg10