Econ_Review

Econ_Review - Econ Review Pure competition involves a very...

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Econ Review Pure competition involves a very large number of firms producing a standardized product. New firms can enter or exit the industry very easily Very Large numbers Standardized product “price takers” cannot change market price, only adjust to it Free entry and Exit Pure monopoly: a market structure in which one firm is the sole seller of a product or service. One firm constitutes the entire industry b/c the monopolist produces a unique product, it makes no effort to differentiate its product Monopolistic competition: characterized by a relatively large number of sellers producing differentiated products. Wide spread nonprice competition – a selling strategy in which one firm tries to distinguish its product or service from all competing products on the basis of attributes like design and workmanship (product differentiation) Either entry to or exit from monopolistically competitive industries is quite easy Oligopoly: involves only a few sellers of a standardized or differentiated product Each firm is affected by the decisions of its rivals and must take those decisions into account in determining its own price and output. Governmental Intervention: Globalization We Need food We have to look at other countries and how they look at USA Pg. 365 Short run economic profit Agriculture products = inelastic demand Pg. 368 Long run - Emphasis Pg. 369 Graph 19.5 Pg. 372 Economics and price support Pg. 373 Restriction of supply – acreage allotment – crop limitation Pr 378 Farm act of 2003 - where do they get their money (taxes)
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Pure Competition – what are the major characteristics of the four markets from the selling side Large number buyers and sellers Standardized products Market is open Price taker Monopoly One seller Product is unique - no close substitute Price maker Market is closed Monopolistic Competition 100-120 firms Product differentiation o Brand names o Chemical competition o Packaging o Service Market semi-blocked – takes years to establish trademark Engage in heavy advertising Oligopolistic Competition A few giant corporations – (oil,) Products similar with some differentiation Prices fixed by company but with some negotiation Engage in heavy advertisements Pure Competition Emphasis on Pg 173 Graph 9.3 Figure 9.5 Pg. 175 Know bankruptcy graph Costs of Production Know how to compute AFC AVC ATC and MC and show graphically AFC = TFC/Q Change in total cost/ change in quantity = MC Pg. 156 and 157 8.7 and 8.8 Long run average cost – what is economies and diseconomies of scale Become profitable - Achieve through economies of scale Specialization Skilled labor Advertisement Communications Innovation Diseconomies of scales Bad management
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Competition Inflation Emphasis on pg 153 – shape of cost curve – explain what is marginal cost, average cost, etc… Consumer behavior -
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Econ_Review - Econ Review Pure competition involves a very...

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