ECON Final Exam Flashcards
(47 cards)
Pure monopoly characteristics
of firms, type of products, barriers to entry, control over price, role of non-price competition
Pure monopoly # of firms
just 1 firm; the firm is the industry
Pure monopoly type of product
unique; no close substitutes
Pure monopoly barriers to entry
quite high barriers, 4 types
4 types of barriers to entry in a pure monopoly
Legal (erected by govt): patents, copyrights, franchises
Exclusive control of an important input: ALCOA, DeBeers
Network Externalities
Economies of Scale
Pure Monopoly control over price
the firm is a price maker
Pure monopoly role of non-price competition
is present. Product promotion, and product development
Single-Price Monopoly
all units sold in any time period, sell for the same price
2 Types of mergers
horizontal
vertical
Guidelines for mergers
market must be defined
measurement of concentration (compute HHI)
Merger standards
Herfindahl-Hirschman Index (HHI)
in a monopoly, HHI=100^2=10,000
in a duopoly, HHI=50^2=5,000
Take share % of sales and square it, add all up to get total HHI
HHI < 1,500
merger is approved
1,500 < HHI < 2,500
might try to block
If HHI increased by less than 100
no challenge, let it go
If HHI increased by more than 100
may be a challenge
HHI > 2,500
if increased by less than 100, no challenge. If increased by between 100 - 200, may challenge. If increased by more than 200, will challenge.
Monopolistic Competition # of firms
a large #, but less than in # in perfect competition
Monopolistic Competition Type of Product
Differentiated - similar but not identical
Monopolistic Competition Barriers to Entry
Low, not difficult to get into
Monopolistic Competition Control Over Price
not much
Monopolistic Competition Role of Non-Price Competition
is present
Oligopoly # of Firms
a few firms are dominate, although there may be competitive fringe
Oligopoly Type of Product
may be standardized (steel, aluminum) or may be differentiated (Cars)
Oligopoly Barriers to Entry
tend to be high, hard to get into
