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CLEP Microeconomic Notes 1

The firms marginal revenue mr has a gap at the kink 2

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The firms Marginal Revenue (MR) has a gap at the kink 2 (b.i.2) Prices above the current price are relatively elastic (b.i.3) Prices below the current price are relatively inelastic 148) Federal Trade Commission (FTC) works with the Justice Department to protect free trade a) FTC handles civil actions b) U.S. Justice Department can handle civil and criminal actions b.i)They have the power to: (b.i.1) Break up firms (b.i.2) Discourage through taxation (b.i.3) Price floor (b.i.4) Price ceilings (b.i.5) Prevent mergers b.ii) Granted these powers through the Sherman Act c) Can exercise power through: c.i) Advising – counsel regarding legality c.ii) Consent decrees – FTC agrees not to fine a business if they cease c.iii) Cease and Desist Orders – tells a business to stop breaking laws or face fines c.iv) Extreme Measures – order a business to sell off assets or dissolve itself 149) Federal Trade Commission Act of 1914 a) Outlawed a.i) unfair or deceptive business practices a.ii) Unfair methods of competition b) Created a commission to investigate and enforce 150) Competition causes firms to be efficient 151) Perfect Competition markets have: (a.i.1) The most substitute products available (a.i.2) The most elasticity (a.i.3) Largest number of sellers (a.i.4) Firms that are price- takers (a.i.5) THE GREATEST OUTPUT!! 152) Barriers affect different market types: a.i) Perfect Competition – no barriers to entry or exit a.ii) Monopolistic Competition – weak barriers may exist a.iii) Oligopoly – large barriers prevent most entry a.iv) Monopoly – complete barriers prevent all entry 153) Nash Equilibrium – is a strategy that requires each firm to base its decisions on the strategies of other firms a) Seeks a point where each firm gains the same amount of utility
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