Week 7 Flashcards
(11 cards)
describe imperfect competition
- firms can differentiate in most situations
- firms are price setters
- market power, ability to raise price of good without losing all sales
show the difference between perfect and imperfect comp on diagram (revenue)
week 7 slide 5
what are the different forms of imperfect comp
- pure monopoly: a market where a single firm is the only seller of a unique product
- oligopoly: only a few firms sell a given product
- monopolistic comp: large number of firms that sell the same product with slight differentiation
describe a monopoly
- many buyers
- one seller
- no close substitutes
- buyers are well informed about the offerings of competing suppliers
- technological or legal barriers
draw the tc diagram
- shape determined by law of diminishing marginal returns (SR) and economies/diseconomies of scale (LR)
where is profit max shown on the total cost diagram
- where TR>TC and the vertical distance between TR and TC is greatest
- week 7 slide 26
describe price discrimiantion
customers are charged different prices for the same good
what are the conditions necessary for price discrimination
- firm must be a price maker
- firm must be able to identify which consumer is which
- consumers must not be be able to resell
describe first degree price discrimination
monopolist knows exactly the willingess to pay of each consumer in the market, then sells each unit of output at a price just equal to the maximal willingess to pay for that unit
describe second degree price discrimination
monopolist knows that its consumers have different willingess to pay but it cannot tell who is who, same price schedule is offered to all buyers but they sort themselves through selection
describe third degree price discrimination
monopolist does not know each consumer’s willingess to pay, instead sees an observable characteristic of its consumers that is related to their willingess to pay, charge different prices based on these
