Unit 8 Flashcards
(22 cards)
What can firms with market power do and what type of competition is it
Set own price = monopolistic competition
What are outcomes of firms who set own price
No Pareto efficient
What are prince taking firms competition
Take price given to them and competitive equilibrium
If multiple firms sell identical goods how much power do they have
No market power and are price takers
Demand curve
Quantity that is willing to be consumed at given price level
Supply curve
Total quantity that firms are willing to offer at given proce level
What equilibrium is it where supply = demand
Nash equilibrium
HOW MUCH INFLUENEC DO PRICAE TAKING FIRMS HAVE
None on the market price
What is demand curve of firm that is price takin
Horizontal line that is equal to market price
Price taking firm max profit
Price = supply (MC)
At competitive equilibrium
Firms are price takers and supply = demand
What does distribution of surplus depend on
Elasticities of supply and demand
What is it when p>p*
Excess supply
what is it when p<p*
Excess demand
What happens when excess supply
Firms reduce price and increase quantity till p* and q* reached
When happens when excess demand
Price is increased and quantity adjusted until p* and q* reached
Chaanges to supply and demand curves
Tech change
Input price change
Popularity of product
When will firms enter market
When firms already in the market are earning economic rent and cost of entry is not too high
What does increased firm in market =
Increased supply at given price
What will increased firms do to market price q
Decrease and reduce economic rent q
How does elastic demand affect DWL
Larger
Perfect competition
Identical goods
Large n.o buyers and sellers
Independent buyers and sellers
Market price easily accesible
