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Competition
The Competitive Market Model Is a Cornerstone of Microeconomics
If supply and demand is the foundation of economics, the analysis of market structure is a close s
EC 360
Mergers
Weve spoken before about the merger waves
of the past
Firms merging implies that two or more firms
become one
Lockheed and Martin become Lockheed Martin
Time, Warner and Turner communications
become TimeWarner which then merges with AOL
MCt is marginal cost of both types of production put together. MCt=MCp+MCr
MCp is the marginal cost of production (the cost of making the good)
MCr is the marginal cost of distribution or retail (the cost of distributing the good)
Dr is just the consumer
EC 360
Vertical Relationships
Think of a stream
Along the stream raw materials become
inputs become parts become final goods
If a firm vertically integrates (merges or
expands) upstream it is taking over the
production of a less developed part
If the
Review Notes for the Final Exam
You should feel comfortable with each of these topics for the final exam.
1. What are the requirements of perfect competition?
2. What is the industry and firm outcome in perfect competition in the long and short run?
3. Wh
EC 360
Price Discrimination
Haircuts
Movie tickets
Airplane tickets
Large customers (industrial consumers of
electricity)
Antitrust and Price Discrimination
Interesting problem
Price discriminating monopolists might reduce
deadweight loss
But wed prefe
Homework #6
Due at the beginning of class, November 26th
Oligopoly and Cartels
1. If monopoly quantity is 100 and monopoly price is $200, what will price and firm
quantity be for a four-member successful cartel?
Each firm will produce 25 units and the pri
Chapter 14: SOLUTIONS TO TEXT PROBLEMS:
Quick Quizzes
1.
When a competitive firm doubles the amount it sells, the price remains the same, so its
total revenue doubles.
2.
The price faced by a profit-maximizing firm is equal to its marginal cost because if
Homework #6
Due at the beginning of class, November 26th
Oligopoly and Cartels
1. If monopoly quantity is 100 and monopoly price is $200, what will price and firm
quantity be for a four-member successful cartel?
2. Lets say that there are two firms using
Homework #5
EC 360
Due at the beginning of class, November 19th
1. Draw the short run monopolistic competition case for a firm. Assume that there are positive
economic profits.
Firms produce at the quantity at which MR=MC. In this case, profits exist beca
Midterm 1 Study Guide
Econ 360 - Ryan Walch
How to Study: All material covered in lecture is fair game for the test.
Generally the best way to study is to look over your lecture notes, the slides
and homework assignments. I will also post some practice pr
60
CHAPTER 10 PERFECT COMPETITION
Assumptions of Perfect Competition
The most competitive market structure is pure or perfect competition, which is as competitive as
possible. As previously mentioned, market structures are models that summarize how certai
Practice Problems
Ryan Walch - EC 360
1. Find all Nash equilibria for the following games. Also give any dominant
strategies.
a)
U
D
L
(6, 2)
(7, 3)
R
(1, 4)
(6, 5)
U
D
L
(3, 2)
(5, 1)
R
(4, 4)
(3, 1)
b)
c)
U
D
L
(6, 10)
(4, 6)
R
(5, 5)
(10, 8)
2. Suppose
Homework III
Econ 360
Ryan Walch
Due Tuesday February 28th , Beginning of Class
Please write your answers on a separate piece of paper. You are free to work
with others but you need to write down your own answers on your own piece
of paper in your own wor
Homework II
Econ 360
Ryan Walch
Due Tuesday February 21st , Beginning of Class
Please write your answers on a separate piece of paper. You are free to work
with others but you need to write down your own answers on your own piece
of paper in your own word
HW1 Key
1. Algebra of Supply and Demand (20 points)
a). Suppose the market for widgets has the following supply and demand
curves
Demand: P = 24 6q
Supply: P = 2q
Assuming a competitive market, find the equilibrium price and quantity.
Solution: To find th
Econ 360 - Midterm 2
Ryan Walch
Winter 2017
Name:
Email:
@uoregon.edu
You have the entire class period to complete the exam. It is closed
notes and closed book. The only items you are allowed on your desk are
a pen/pencil and a non-graphing calculator. Ev
Final Study Guide
Econ 360 - Ryan Walch
How to Study: All material covered in lecture is fair game for the test.
The final is cumulative. Generally the best way to study is to look over your
lecture notes, the slides. Make sure you can do and understand a
Midterm 2 Study Guide
Econ 360 - Ryan Walch
How to Study: All material covered in lecture is fair game for the test.
The material for midterm 1 will not be on the second midterm but it will
be on the final. Generally the best way to study is to look over
Econ 360 - Midterm I
Ryan Walch
Winter 2017
Name:
Email:
@uoregon.edu
You have the entire class period to complete the exam. It is closed
notes and closed book. The only items you are allowed on your desk are
a pen/pencil and a non-graphing calculator. Ev
Practice Problems
Ryan Walch - EC 360
1. Find all Nash equilibria for the following games. Also give any dominant
strategies.
a)
U
D
L
(6, 2)
(7, 3)
R
(1, 4)
(6, 5)
Solution: Recall, that the Nash equilibrium occurs where both players are
best responding.
Homework #4
Due at the beginning of class, November 12th
Predatory Pricing and Price Discrimination
a.
b.
c.
d.
e.
1. Lets say we have two car companies, Nissan and Toyota. Toyota is a monopolist
and Nissan is thinking of entering. If Toyota is left alone
Homework #5
EC 360
Due at the beginning of class, November 19th
1. Draw the short run monopolistic competition case for a firm. Assume that there are positive
economic profits.
2. Draw the long run monopolistic competition case for a firm.
3. What are the
Example Exam Questions (Mathematical, Graphical)
1. Calculate the HHI for an industry with 5 identical sized firms.
2. A horizontal merger is proposed, which would increase market power and reduce cost
of production. Sales would go from 500 units to 400,
EC 360
Degrees of Competition
Perfect competition
Standard
No competition
Monopoly
Imperfect competition
Monopolistic competition
Imperfect cooperation
Collusion with the risk of deviation
Perfect cooperation
Functionally the same as monopoly
Ca
EC 360
Antitrust History
The history of antitrust is worth studying in
part because economic theory followed
practice, not the other way around
Why focus on America?
Large economy
At or near the technological frontier for the last
century
For the las
Homework #4
Due at the beginning of class, November 12th
Predatory Pricing and Price Discrimination
1. Lets say we have two car companies, Nissan and Toyota. Toyota is a monopolist
and Nissan is thinking of entering. If Toyota is left alone, theyll make $
Homework #3
Due at the beginning of class, October 22nd
Monopsony and Antitrust
1. Assume a demand function given as P=250-5Q. Assume that there is a single
unregulated, profit-maximizing firm in the industry, with constant marginal cost
MC=10. Find the d
Homework #2
1. Assume that we have a demand function given as P=250-5Q. What is marginal
revenue for a monopolist?
MR=250-10Q
2. Assume that marginal cost for the monopolist is given as MC=10+5Q (this is for the
same monopolist from problem one). What is
Homework #1 Key
EC 360
Due January 16th
1. Any firm that is paying out more money than it is taking in should shut down its
operations at once. Is this sound advice?
No. The firm should only shut down operations if it is taking in less than it is spending