ECO 201 Miami University Exam 3 Latest
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"shut down" price - Answer -when P=AVC=MC (min of AVC)
-the lowest price at which the firm will still operate in the short run
2 part pricing - Answer --best for products with high fixed costs
-charge annual one time access fee = CS
-charge per unit price = MC
2nd or 3rd degree price discrimination - Answer --groups of consumers are charged different
prices
ex: pricing on an aircraft, couponing, rebates, volume discounting
accounting profit = - Answer -total revenue - accounting total costs
accounting total cost - Answer -explicit costs only
antitrust policy - Answer --states that it is not illegal to be a monopoly, but it is illegal to
monopolize
-Federal Trade Commission (FTC) & Dept. of Justice (DOJ) enforce this policy through the courts
ATC = - Answer -AFC + AVC
average fixed cost - Answer -fixed cost per unit = FC / Q
continuously declines as output rises
Average total cost (ATC) - Answer -TC/Q or AFC + AVC
Average variable cost (AVC) - Answer -VC/Q, graphed as a U-shaped curve
best response - Answer -the strategy that maximizes the player's well-being, conditional on that
action being taken
commodity bundling - Answer --bundle products together and sell as a package price
-useful when consumers have different values for products sold by the same company
(cable/internet/phone)
, consumers are _______ _____ under monopoly - Answer -worse off
dominant strategy - Answer -the action that gives the player the best outcome regardless of what
the other player does
economic profit < 0 - Answer -firm's owner is doing worse than she/he could in his/her next best
alternative
economic profit = - Answer -total revenue - economic total costs
economic profit > 0 - Answer -firm's owner is doing better than she/he could in her/his next best
alternative
economic total cost - Answer -accounting total cost + implicit costs
economic total cost is opportunity cost
extensive form games - Answer -one player moves first
FC = - Answer -(ATC-AVC) x Q*
firms in monopolistic competition will maximize profit by producing all units where - Answer -MR
>= MC
fixed costs (FC) - Answer -costs that do not change as output changes (rent)... only exist in the
short run
game theory - Answer -technique used to understand strategic interactions between firms
Herfindahl-Hirschman Index (HHI) - Answer --a way to measure how competitive a market is
-the square of the percentage market share of each firm (top 50) summed = (firm 1 market)^2 + (firm
2)^2 + [....] (firm 50)^2
horizontal merger - Answer -a merger between 2+ firms providing essentially the same product or
service (ex: office max & staples or U.S. Air & american airlines)
how do the FTC & DOJ enforce the antitrust policy? - Answer --can charge a firm with being
anticompetitive
-can sue to prevent mergers (if mergers reduce competition "too much")
In a monopolized industry, prices will be ___________ & eq'm quantity will be _________ than if the
industry was competitive - Answer -higher, lower
in the long run all perfectly competitive firms earn a profit of ________ - Answer -zero
in the long run, monopolistically competitive firms have a profit of ______ - Answer -zero
in the short run... - Answer -Q=f(L) because capital is fixed
Update Questions with Correct Answers
Download and Get A Perfect Score
"shut down" price - Answer -when P=AVC=MC (min of AVC)
-the lowest price at which the firm will still operate in the short run
2 part pricing - Answer --best for products with high fixed costs
-charge annual one time access fee = CS
-charge per unit price = MC
2nd or 3rd degree price discrimination - Answer --groups of consumers are charged different
prices
ex: pricing on an aircraft, couponing, rebates, volume discounting
accounting profit = - Answer -total revenue - accounting total costs
accounting total cost - Answer -explicit costs only
antitrust policy - Answer --states that it is not illegal to be a monopoly, but it is illegal to
monopolize
-Federal Trade Commission (FTC) & Dept. of Justice (DOJ) enforce this policy through the courts
ATC = - Answer -AFC + AVC
average fixed cost - Answer -fixed cost per unit = FC / Q
continuously declines as output rises
Average total cost (ATC) - Answer -TC/Q or AFC + AVC
Average variable cost (AVC) - Answer -VC/Q, graphed as a U-shaped curve
best response - Answer -the strategy that maximizes the player's well-being, conditional on that
action being taken
commodity bundling - Answer --bundle products together and sell as a package price
-useful when consumers have different values for products sold by the same company
(cable/internet/phone)
, consumers are _______ _____ under monopoly - Answer -worse off
dominant strategy - Answer -the action that gives the player the best outcome regardless of what
the other player does
economic profit < 0 - Answer -firm's owner is doing worse than she/he could in his/her next best
alternative
economic profit = - Answer -total revenue - economic total costs
economic profit > 0 - Answer -firm's owner is doing better than she/he could in her/his next best
alternative
economic total cost - Answer -accounting total cost + implicit costs
economic total cost is opportunity cost
extensive form games - Answer -one player moves first
FC = - Answer -(ATC-AVC) x Q*
firms in monopolistic competition will maximize profit by producing all units where - Answer -MR
>= MC
fixed costs (FC) - Answer -costs that do not change as output changes (rent)... only exist in the
short run
game theory - Answer -technique used to understand strategic interactions between firms
Herfindahl-Hirschman Index (HHI) - Answer --a way to measure how competitive a market is
-the square of the percentage market share of each firm (top 50) summed = (firm 1 market)^2 + (firm
2)^2 + [....] (firm 50)^2
horizontal merger - Answer -a merger between 2+ firms providing essentially the same product or
service (ex: office max & staples or U.S. Air & american airlines)
how do the FTC & DOJ enforce the antitrust policy? - Answer --can charge a firm with being
anticompetitive
-can sue to prevent mergers (if mergers reduce competition "too much")
In a monopolized industry, prices will be ___________ & eq'm quantity will be _________ than if the
industry was competitive - Answer -higher, lower
in the long run all perfectly competitive firms earn a profit of ________ - Answer -zero
in the long run, monopolistically competitive firms have a profit of ______ - Answer -zero
in the short run... - Answer -Q=f(L) because capital is fixed
