Chapter 9 - 3 Oligopoly a Ex Breakfast Cereal b Because there are a few major cereal manufacturers and whenever one company does something new the

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sChapter 9 Marginal Cost = Change in Total Cost/ Change in Quantity Margincal cost goes up marginal product goes down. Marginal coast = Wage/ marginal product Average Veriable Cost = Veribale Cost/ Quantity = (Wage x Labor)/ Quantity MC = ( change in Fixed Cost + Change in Variable Costs)/ Change in Quantity If MC> ATC then ATC RISES If MC< ATC then ATC FALLS If MC= ATC then No change in ATC Where marginal cost crosses Average Total Cost curve is where Average Total cost is at Minimum As output expands, the difference between ATC and AVC decreases COSTS IN LONG RUN In long run FC = O 4 industries 1. Perfect competition 2. Monopolistic competition a. Alittle bit of a monopoly and a little bit of perfect
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Unformatted text preview: 3. Oligopoly a. Ex Breakfast Cereal b. Because there are a few major cereal manufacturers and whenever one company does something new the other company has to do something to respond 4. Monopoly a. No competition there is no substitutes for the good Measures of Competition or concentration More competitive = less concentrated Less competitive = more concentrated 1. concentration ratio a. % of sales accounted for by four largest firms in the industry 2. Herfindahl-Hirschman Index (HHI) a. Sum of the squared market shares DOJ Guidelines HHI< 1000 -Not concentrated 1000< HHI<1800 -Moderately concentrated HHI>1800 –Concentrated...
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This note was uploaded on 05/03/2009 for the course ECON 251 taught by Professor Blanchard during the Spring '08 term at Purdue University-West Lafayette.

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Chapter 9 - 3 Oligopoly a Ex Breakfast Cereal b Because there are a few major cereal manufacturers and whenever one company does something new the

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