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by: Austin Curry


Marketplace > University of Oregon > Economcs > ECON360 > FINAL EXAM STUDY GUIDE
Austin Curry
GPA 3.2
Econ 360
Jon Thompson

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Econ 360
Jon Thompson
Study Guide
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Popular in Economcs

This 6 page Study Guide was uploaded by Austin Curry on Friday April 3, 2015. The Study Guide belongs to ECON360 at University of Oregon taught by Jon Thompson in Fall. Since its upload, it has received 176 views. For similar materials see Econ 360 in Economcs at University of Oregon.




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Date Created: 04/03/15
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 Perfect comp requires 0 Homogenous products 0 Large number of buyers and sellers 0 Perfect information Prices Quality Production technology 3 Why do we like the perfectly competitive outcome 0 Most socially optimal option 4 What is the difference between allocative and productive efficiency Allocative vs productive efficiech Production Efficiency Consumers are able to purchase the product at the lowest price consistent with the long run survival of the firms in the industry price is driven to the minimum point of the firms longrun average cost curve Lowest possible costs Allocative Efficiency society s marginal willingness to pay for the last unit of each good produced is just equal to the marginal opportunity cost of that unit price equal to marginal cost Competitive outcome 7 What are natural monopolies and why do they create problems for antitrust authorities 0 Natural monopoly resulting in minimum efficient scale being greater than the profitmaximizing production quantity for a single firm in a monopoly setting graph 0 Under a natural monopoly competition would lead to pricing below average cost Natural Barriers 1 Control of resources by controlling a resource essential to producing a good 2 Problems Raising Capital once a monopoly is well established banks are unlikely to give lend money 3 Economies of Scale cost per unit falls as output increases 0 A monopoly that occurs because a single firm has lower costs than any potential smaller competitor 8 Why are entry barriers critical to long run monopoly success 0 in order to keep firms from entering the market 9 What is the difference between accounting and economic pro t 0 Accounting profit is the monetary costs a firm pays out and the revenue a firm receives It is the bookkeeping profit and it is higher than economic profit Accounting profit total monetary revenue total costs 0 Economic profit is the monetary costs and opportunity costs a firm pays and the revenue a firm receives Economic profit total revenue explicit costs implicit costs 10 How is deadweight loss de ned and calculated 0 deadweight loss is the difference between existing total surplus and maximized total surplus 0 Monopolies are not socially efficient for society 0 Welfare loss can occur in the long run equilibrium 0 Welfare loss DWL 12 Change P Change Q 11 Who has standing to bring suit in the case of a rm being accused of antitrust violations 0 If an antitrust violation causes a business to lose profits the business can sue for the value of the lost profits 0 If a firm or a consumer has paid too much for a good or service because of an antitrust violation the suit will be for the overcharges 0 basically the measure of damage is roughly equal to the wealth transferred to the monopolist from the buyers 0 Any person real or fictional can bring suit against a company for antitrust violation 13 Why is settlement more likely than a completed court case in antitrust cases 0 Settlement saves money and takes into account the opportunity costs effected 0 The discovery process is shown to promote settlement by causing the two parties subjective probabilities of the plaintiff s success to converge THIS explains why 8590 percent of these cases settle 0 More economically efficient 14 What are the four elements we use to define a relevant market 0 There are four key factors in defining a relevant market all of them deal with substitutability Geographic demand Geographic supply Product demand Product supply 15 Why do we use demand elasticity as a measure of market power 0 To see how responsive consumers are to change in price 17 What is the purpose of the Lerner index Measures monopoly power It is simplyF the ratio of the difference between competitive and monopolistic price to the monopolistic price graph 0 ii 2 IE 2 expand n is the own price elasticity of the tirm s demand curve 19 If there are monopolies in two markets what can we use to identify one as being more important than the other 0 Cross price elasticity 32 How does a firm profitmaximize when splitting production over two markets 34 What are the costs and benefits of monopolistic competition compared to monopoly 35 What are the costs and bene ts of cartel compared to monopoly 0 Have to work with partners 0 Entry is a key problem in the longrun 36 Why might some cartels break down 0 Partnership may break down 37 How can a cartel avoid breaking down 38 How does the value of the future in uence the viability of a cartel 39 What is the difference between price and quantity competition 40 What happens to equilibrium price and quantity as the number of firms grows in quantity competition 41 With a finite number of firms how does equilibrium price and quantity compare in quantity competition to those found in monopolistic markets or those with perfect competition 42 Do we assume that rms cooperate to obtain economic pro ts in Cournot competition 0 No the firms actions affect each other 0 They will be competing by changing their quantities and not their prices 0 At the Cournot equilibrium no one can profit by individually restricting or increasing their output OThis suggests that Cournot competition is a midpoint between perfect competition and monopoly models 43 What is tacit collusion 0 Basically just choosing to play the price fixing strategy Without a meeting 0 Purely tacit collusion involves no agreements 0 So it is simply not illegal 0 Courts rely on plus factors pieces of evidence that involve information sharing to supplement parallel pricing 44 How can price commitments help coordinate tacit collusion 45 What are the costs and benefits of horizontal mergers Horiz merger cartel 46 How can mergers help to reduce equilibrium quantity even in the absence of monopoly 47 What happens to the value of nonmerged rms in the wake of signi cant merger activity 48 How can mergers be used to improve the quality of corporate management 49 What are the unilateral and coordinated effects of mergers 50 How do we measure concentration 51 Why might it be efficient to err on the side of being too restrictive in blocking mergers 52 What are the costs and benefits of vertical integration 53 Aside from the law what limits the desirability of vertical integration 54 Does an upstream monopolist want to encourage the creation of a downstream monopolist 55 What are the conditions for vertical integration to bar entry


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