Econ 2: Final Exam Review - Blue Book Ques ● Marketable permits ● Compare … ● Skis and snowboard ex ○ Resources get shifted from one resource

Econ 2: Final Exam Review - Blue Book Ques ● Marketable...

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Blue Book Ques Marketable permits Compare … Skis and snowboard ex Resources get shifted from one resource to other bc of inputs/change in market ….. Monopolistic competition Know how it shifts Reproduce table from WS Price discrimination Conditions needed to price discriminate: 1. Face downward sloping DEMAND (monopoly power) 2. Distinguishable customers w dif demand elasticities Break into vacation travelers vs business travelers Coupon clippers vs those who do not have time to do so 3. Prevent resale Two examples: 1. -Business travelers need to go to specific location NO subs INelastic demand -Vacation travelers have choices Elastic demand 2. -Coupon clippers have time to clip coupons/look for best deal Elastic -NON-coupon clipper in hurry INelastic **Look at graphs**
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MC Ques ** MONOPOLY produces at HIGHER price + LESS output compared to competitive firm Extreme ends of market: One end is perf competition VS MONOPOLY is at other end MONOPOLISTS sets price Price setter Price relationship of monopoly w/ MR Monopolists MAAAAAXXXX profits at MR = MC ECON OF SCALE MONOPOLY === If company is growing big + lots of infrastructure (same thing as natural monopoly) LOCATION MONOPOLY == if only store on moon SUNK COST = expenditure that has been made and canNOT be recovered ALWAYS: if mon faces +++ MC based on ELASTIC portion of demand curve Monop sells at HIGHER price at LESS output than competitive market (#10 is almost same as #1) If MC or cos per unit increases by CONSTANT amt ===> shifts/increases MC by CONSTANT amt Price gets SMAAAALLLER Conditions that make up MONOP COMPETITION: Know/memorize chart MANY buyers MANY firms Differentiated goods w close subs Easy entry, exit Profits go to ZERO in long run P >>> MR + MC Sell at price HIGHER than MR and MC (=INefficient) but still ZERO
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profits in long run Long run equilibrium in MON COMP P = ATC When D is elastic: (does NOT apply to profit) Raise prices ===> rev goes DOOOOWN Lower price ===> rev goes UUUUUP OLIGOPOLY = each firm recognizes that its actions AFFECT actions of other firm and vice versa OOOvert collusion: written/spOOken agreement to collude VS TACIT collusion: UNNNwritten/UNNspoken DOM strategy: where no matter what rival does, make SAAAMMMEEE choice Do SAAAMMMMEE thing no matter what competitor does Prisoner’s dilemma Titt for Tat strategy: reward cooperation w cooperation Reward cheating w cheating Follow DOOOOMMM strategy for prisoner's dilemma Each firm better off making SAAAAMMMEE choice In order to price discriminate: 1. Face DOOOOWNward sloping curve (monopoly power) 2. Distinguish customers w dif demand elasticity 3. NOOOO resale Marginal rev product (MRP) == MR * P product MP looks the SAAAME as MRP Marginal product is always following MRP Labor demand for firm = firm's MRP curve VS Industry’s labor demand = SUM for all MRP curves for all indiv firms
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