Peregrine Exam: Microeconomics
Review
Average Fixed Cost Curve - ANS-Decrease due to spending
Average Total Cost Curve - ANS-- U-formed within the brief run (reflects decreasing costs due to
spreading versus increasing expenses because of diminishing marginal returns)
- Flatten out in longer term (fixed charges grow to be variable in the long run)
Average Variable Cost Curve - ANS-Decrease because of gains from specialization, then boom
due to diminishing marginal returns
Cartels Don't Last - ANS-- Members Always Break Agreements Due to Desire for More Profits
- Governments Use Concentration Ratios to Determine if Oligopolies are Anti-Competitive
Companies promote differentiated merchandise... - ANS-- To keep away from opposition on
product, region, and to offer particular offerings & fee
Competitors Enter Market --> Increase Average Total Cost - ANS-- Pay for more advertising and
other extras for clients
- Reduces profit through increasing ATC
Consumer Surplus (CS) - ANS-- (Maximum Buying Price)-(Price Paid)
- Difference among the max price a consumer is inclined to pay for a good or service and they
rate paid
Differentiated (Heterogeneous) Products - ANS-Use brands to emphasise differences
Differentiation brings what? - ANS-- Customer Loyalty
- Market Power
Each firm produces & sells homogeneous products: - ANS-No advertising; Relies on enterprise
associations and states
Firms are collectively interdependent - ANS-One corporation's behavior relies upon on another
firm's conduct
· Leads to collusion (mystery cooperation) with the aid of firms
· Add It Up: High Costs to Enter + Few Firms + Inelastic Downward-Sloping Demand Curve +
Intense Competition + Profit Maximization
Review
Average Fixed Cost Curve - ANS-Decrease due to spending
Average Total Cost Curve - ANS-- U-formed within the brief run (reflects decreasing costs due to
spreading versus increasing expenses because of diminishing marginal returns)
- Flatten out in longer term (fixed charges grow to be variable in the long run)
Average Variable Cost Curve - ANS-Decrease because of gains from specialization, then boom
due to diminishing marginal returns
Cartels Don't Last - ANS-- Members Always Break Agreements Due to Desire for More Profits
- Governments Use Concentration Ratios to Determine if Oligopolies are Anti-Competitive
Companies promote differentiated merchandise... - ANS-- To keep away from opposition on
product, region, and to offer particular offerings & fee
Competitors Enter Market --> Increase Average Total Cost - ANS-- Pay for more advertising and
other extras for clients
- Reduces profit through increasing ATC
Consumer Surplus (CS) - ANS-- (Maximum Buying Price)-(Price Paid)
- Difference among the max price a consumer is inclined to pay for a good or service and they
rate paid
Differentiated (Heterogeneous) Products - ANS-Use brands to emphasise differences
Differentiation brings what? - ANS-- Customer Loyalty
- Market Power
Each firm produces & sells homogeneous products: - ANS-No advertising; Relies on enterprise
associations and states
Firms are collectively interdependent - ANS-One corporation's behavior relies upon on another
firm's conduct
· Leads to collusion (mystery cooperation) with the aid of firms
· Add It Up: High Costs to Enter + Few Firms + Inelastic Downward-Sloping Demand Curve +
Intense Competition + Profit Maximization
