1 RELEVANT TO ACCA QUALIFICATION PAPER F1 / FOUNDATIONS IN ACCOUNTANCY PAPER FAB Introduction to microeconomics The new Paper F1/FAB, Accountant in Business carried over many subjects from its Paper F1 predecessor, but also includes several subjects that are new to the syllabus. Among these is microeconomics. This article provides a broad overview of microeconomics. It is intended to introduce key topics to those who have not studied microeconomics, and to offer a revision to those who have done so. What is microeconomics? Microeconomics is the branch of economics that considers the behaviour of decision takers within the economy, such as individuals, households and firms. The work firm is used generically to refer to all types of business. Microeconomics contrasts with the study of macroeconomics, which considers the economy as a whole. Scarcity, choice and opportunity cost The platform on which microeconomic thought is built lies at the very heart of economic thinking namely, how decision takers choose between scarce resources that have alternative uses. Consumers demand goods and services and producers offer these for sale, but nobody can take everything they want from the economic system. Choices have to be made, and for every choice made something is forgone. An individual may choose to buy a car, but in doing so may have to give up a holiday which they might have used the money for, if they had not chosen to buy the car. In this example, the holiday is the opportunity cost of the car. Just as individuals and households make opportunity cost decisions about what they consume, so too do firms take decisions about what to produce, and in doing so preclude themselves from producing alternative goods and services. Producers also have to decide how much to produce and for whom. A simple answer to the first question might be: As much as possible of course, using all the resources we can. However, classical economists teach us that if we combine all of the factors of production land, labour, capital and the entrepreneur in different ways, we can get some surprising results. One of the most famous of these is confirmed by the law of diminishing returns. This law states that if we keep on adding variable factors of production (such as labour) to fixed factors (such as land), we will get proportionally less output from each additional unit of factor added until, eventually, overall output will start to decrease with each additional unit of factor added.
2 2 The price mechanism Much of the study of microeconomics is devoted to analysis of how prices are determined in markets. A market is any system through which producers and consumers come together. In early subsistence economies, markets were usually physical locations where people would come together to trade. In more complex economic systems, markets do not depend on humans actually meeting one another, so many markets today arise when producers and consumers come together less directly, such as by post and on the internet. Producers and consumers generate forces that we call supply and demand respectively, and it is their interaction within the market that creates the price mechanism. This mechanism was once famously described as the invisible hand that guides the actions of producers and consumers. Markets are essential to produce the goods and services required for everyday life. Even if an individual can produce all the food needed to survive, that person will still need clothes, shelter and other necessities. Therefore, from very early times, communities learned that they would benefit from exchange. The crudest form of exchange was barter, but the evolution of money as a medium of exchange and unit of account accelerated the development of the process. But how would people know what they could charge, or what they should pay, for goods and services? Before any formal thought was given to this, traders soon discovered that if they fixed their prices too low they would soon run out of inventory, while if they set their prices too high they would not sell what they had produced. In physical markets there would often be perfect knowledge, as traders would be able to check the prices of those who had similar goods and services to trade, simply by walking around the stalls. Once markets became more remote, less perfect knowledge of prices was inevitable and the process became less certain. Alfred Marshall, whose Principles of Economics was published in 1890, drew heavily on the writings of Jevons and Mill. However, much of what you read today about supply and demand, elasticity, revenues and costs and marginal utility are based on Marshall s thoughts. Marshall provided a base upon which formal analysis of supply and demand, and consequently the determination of prices in markets, could be built. Demand Demand is created by the needs of consumers, and the nature of demand owes much to the underpinning worth that consumers perceive the good or service to have. We all need necessities, such as basic foodstuffs, but other products may be highly sought after by some and regarded as worthless by others.
3 3 The level of demand for a good or service is determined by several factors, including: the price of the good or service prices of other goods and services, especially substitutes and complements income tastes and preferences expectations. In orthodox economic analysis, these determinants are analysed by testing the quantity demanded against one of these variables, holding all others to be constant (or ceteris paribus). The most common way of analysing demand is to consider the relationship between quantity demanded and price. Assuming that people behave rationally, and that other determinants of demand are constant, the quantity demanded has an inverse relationship with price. Therefore, if price increases, the quantity demanded falls, and vice versa. Figure 1 portrays the conventional demand curve. For any change in price, there is an inverse change in quantity demanded. The price increase from OP1 to OP1 results in a reduction in quantity demanded from OQ1 to OQ2. A change in price will cause a movement along the curve. When the price increases, the quantity demanded will reduce. This happens with most types of goods, with some bizarre exceptions. Demand for what are known as Giffen goods actually rises with an increase in the price for such goods. For example, when the price of rice increases in some regions of China, more rice will be purchased, as there is not enough income left over to some consumers to purchase higher value food items.
4 4 If we then relax the assumption that other variables (such as income and tax rates, etc) are constant, what happens then? An increase in income will often cause the demand for a good or service to increase, and this will shift the whole curve away from the origin. Likewise, a reduction in the price of a substitute good will move the demand curve towards the origin as the good in question will then be less attractive to the consumer. While these generalisations are useful, it is important to remember that economic behaviour is based on human decisions, and so we can never predict fully how people will act. For example, some very basic foodstuffs will become less popular as incomes increase and when consumers find that they no longer have to subsist on basic diets. Supply Supply refers to the quantity of goods and services offered to the market by producers. Just as we can map the relationship between quantity demanded and price, we can also consider the relationship between quantity supplied and price. Generally, suppliers will be prepared to produce more goods and services the higher the price they can obtain. Therefore, the supply curve when holding other influences constant will slope upwards from left to right, as illustrated in Figure 2. 2#3)"%4&546)//0-4$)"7%!"#$% 6 There is a direct relationship between price and quantity supplied. An increase in price from OP1 to OP2 results in an increase in quantity supplied from OQ1 to OQ2.!&!' 6 8 (' (& ()*+,#,-.)//0#%1 The determinants of supply are: price prices of other goods and services relative revenues and costs of making the good or service
5 5 the objectives of producers and their future expectations technology. Generally, a firm will maximise profit when its marginal revenue (the revenue arising from selling one extra unit of production) equals its marginal cost (the cost of producing that one extra unit of production). However, a firm may continue to produce as long as the marginal revenue exceeds its average variable costs, as in doing so it will be making a contribution towards covering its fixed costs. Following the same rationale as applied earlier, a movement along the supply curve will be brought about by a change in price, but a movement of the whole curve will be caused by a determinant other than price. Elasticity The concept of elasticity is concerned with the responsiveness of quantity demanded or quantity supplied to a change in price. If a small change in price brings about a massive change in quantity demanded, the price elasticity of demand is said to be highly elastic. Conversely, if a change in price has little or no effect on the quantity demanded, the demand is said to be highly inelastic. This concept is obviously very important to producers, who have to estimate the potential effects of their pricing strategies over time. It is also important to government finance departments, which have to model the implications of imposing sales taxes on goods and services in order to predict tax revenues. Price elasticity of demand is measured by dividing the change in quantity demanded by the change in price and, conversely, price elasticity of supply is measured by dividing the change in quantity supplied by the change in price. Price elasticity of demand occurs when an increase in price leads to a reduction in total revenue (p x q) between those two points on the demand curve, and price inelasticity occurs when an increase in price leads to an increase in total revenue. Unitary elasticity occurs when the change in price causes no change in total revenue. In addition to price elasticity, there are similar concepts of relevance to your study: Income elasticity is the responsiveness of quantity demanded or supplied to a change in income. Cross elasticity is the responsiveness of quantity demanded or supplied of good X to a change in price of good Y.
6 6 Equilibrium Assuming all determinants of supply and demand are to be constant except price, a firm will produce where the supply curve intersects the demand curve. By definition, this is the point at which the quantity supplied equals the quantity demanded (Figure 3). -#.'"%/01/23'#4#5"#'6!"#$%, 7 Price is determined at the intersection of the supply and demand curves.! 7, 8 & &'()*#*+ If the price is set above the equilibrium price, this will result in the quantity supplied exceeding the quantity demanded. Therefore, in order to clear its inventory, the company will need to reduce its price. Conversely, if the price is set below the equilibrium price, this will result in an excess demand situation, and the only way to eliminate this is to increase the price. Market intervention In capitalist systems, allowing markets to operate freely is considered to be desirable, but it is generally accepted that market forces cannot be permitted to operate for all the goods and services required by society. Some goods and services are public goods and services, which means that they can only be provided adequately by intervention. These include law and order and the military. For this reason, the government or supra-national organisations may choose to introduce and maintain systems that will ensure that such goods and services are produced, and may fix prices either above or below the equilibrium price. A maximum price is sometimes imposed in order to protect consumers. This will result in a situation in which the quantity demanded will exceed the
7 7 quantity supplied, provided the maximum price is struck below the equilibrium price (Figure 4). There are numerous examples of this in real life. During World War 2, the UK government intervened in this way in order to ensure that families could obtain adequate supplies of goods such as bread, butter and petrol. One consequence of this is that there was excess demand in the system, and this led to an illegal market developing. /#0)"%12314*5#6)617"#$%!"#$%. 8 Maximum price is OP1. At this point, the quantity demanded (OQ1) exceeds quantity supplied (OQ2). The black market price is OP2.!&!( 8. 9 '& '( ')*+,#,- A minimum price is sometimes imposed in order to protect producers. Here, the quantity supplied will exceed the quantity demanded, provided the minimum price is struck at a level above the equilibrium price. One of the goals of the European Union (EU) has been to protect the agricultural sector, and the common agricultural policy is a minimum price system. As a consequence of this, the agricultural sector of the EU has periodically generated surpluses. The impact of intervention in the price system should not be seen as undesirable in all cases. However, one of the contributions that microeconomic analysis makes is that it teaches us that there will be consequences of such interventions, and society has to manage those consequences. Theory of the firm The theory of the firm is a branch of microeconomics that examines the different ways in which firms within an industry may be structured, and seeks to derive lessons from these alternative structures.
8 8 Perfect competition A perfectly competitive market is one in which: there are many firms producing homogeneous goods or services there are no barriers to entry to the market or exit from the market both producers and consumers have perfect knowledge of the market place. Under such conditions, the price and level of output will always tend towards equilibrium as any producer that sets a price above equilibrium will not sell anything at all, and any producer that sets a price below equilibrium will obtain 100% market share. The demand curve is perfectly elastic, which means that it will be horizontal. As these conditions imply, there are few if any examples of perfectly competitive markets in real life. However, some financial markets approximate to this extreme model, and there is no doubt that in some fields of commerce the development of the internet as a trading platform has made the markets for some products, if not perfectly competitive, then certainly less imperfect. Monopoly A monopoly arises when there is only one producer in the market. It should be noted the laws of many countries define a monopoly in less extreme terms, usually referring to firms that have more than a specified share of a market. Unlike perfect competition, monopolies can and do arise in real life. This may be because the producer has a statutory right to be the only producer, or the producer may be a corporation owned by the government itself. A monopoly enjoys a privilege in that it can strike its own price in the market place, which can give rise to what economists call super-normal profits. For this reason, monopolies are usually subject to government control, or to regulation by non-governmental organisations. Oligopoly An oligopoly arises when there are few producers that exert considerable influence in a market. As there are few producers, they are likely to have a high level of knowledge about the actions of their competitors, and should be able to predict responses to changes in their strategies. The minimum number of firms in an oligopoly is two, and this particular form of oligopoly is called a duopoly. There are several examples of duopolies, including the two major cola producers and, for several product lines, Unilever and Procter & Gamble. However, markets dominated by perhaps up to six producers could be regarded as oligopolistic in nature. Where a few large producers dominate a market, the industry is said to be highly concentrated.
9 9 Although it is difficult to make generalisations across all oligopolistic markets, it is frequently noted that their characteristics include complex use of product differentiation, significant barriers to entry and a high level of influence on prices in the market place. Monopolistic competition Monopolistic competition arises in markets where there are many producers, but they will tend to use product differentiation to distinguish themselves from other producers in the market. Therefore, although their products may be very similar, their ability to differentiate means that they can act as monopolies in the short-run, irrespective of the actions of their competitors. For monopolistic competition to exist, consumers must know of or perceive differences in products sold by firms. There tend to be fewer barriers to entry or exit than in oligopolistic markets. Conclusions Those embarking on their studies for Paper F1/FAB will quickly become aware that the syllabus is broad but shallow. It is essential to cover a wide range of topics, without necessarily having to study each component part in depth. The purpose of this article has therefore been to provide basic information on the most important areas of microeconomics without any intention of exploring any individual topic in detail. Awareness of key principles is important, but candidates should not assume that they have to be experts in order to deal with the objective test questions in the exam. Robert Souster is examiner for Paper F1/FAB
AS Economics Unit 1: Markets and Market Failure Syllabus, Key Terms & Charts 10.1 The Economic Problem The Nature and Purpose of Economic Activity The central purpose of economic activity is the production
Microeconomics Instructor Miller Practice Problems Monopolistic Competition 1. A monopolistically competitive market is described as one in which there are A) a few firms producing an identical product.
Chapter 6 The Two Extremes: Perfect Competition and Pure Monopoly Learning Objectives List the four characteristics of a perfectly competitive market. Describe how a perfect competitor makes the decision
Chapter 13 Perfect Competition 13.1 A Firm's Profit-Maximizing Choices 1) What is the difference between perfect competition and monopolistic competition? A) Perfect competition has a large number of small
Chapter 6 We recall that perfect competition was theorised as a market structure where both consumers and firms were price takers. The behaviour of the firm in such circumstances was described in the Chapter
Government Intervention Deadweight Loss à the loss in economic surplus due to the market being prevented from reaching the equilibrium price and quantity where marginal benefit (MB) equals marginal cost
The Difference Between Macroeconomics and Microeconomics Chapter 2 Microeconomic Principles 2.1 The Difference between Macroeconomics and Microeconomics 2.2 Supply and Demand 2.3 Price Elasticity Macroeconomics
UNIT 6 cont PRICING UNDER DIFFERENT MARKET STRUCTURES Monopolistic Competition Market Structure Perfect Competition Pure Monopoly Monopolistic Competition Oligopoly Duopoly Monopoly The further right on
Economics EOC Quiz Answer Key Microeconomic Concepts - (SSEMI1) Flow Of Goods, (SSEMI2) Law Of Demand, (SSEMI3) Economic Behavior, (SSEMI4) Organization And Role Of Business Student Name: Teacher Name:
MARKET Market is a place where consumers meet sellers and the trading takes place. The consumers buy products at certain price, so money is exchanged for goods and services. We distinguish types of market
MBA 640 Survey of Microeconomics Fall 2006, Quiz 6 Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) A monopoly is best defined as a firm that
CHAPTER CHECKLIST Perfect Competition Chapter 12 1. Explain a perfectly competitive firm s profit maximizing choices and derive its supply curve. 2. Explain how output, price, and profit are determined
Chapter 5 Price SS p f This chapter will be built on the foundation laid down in Chapters 2 and 4 where we studied the consumer and firm behaviour when they are price takers. In Chapter 2, we have seen
MBA 640, Survey of Microeconomics Fall 2006, Final Exam Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) The "law of demand" states that, other
J. K. SHAH CLASSES QUESTION PAPER Date: 25/09/2016 Total Marks: 40 Total time: 2 hour Solutions Ans.1. (A) Fill in the Blank: 1) Ragner Frisch 2) Larger 3) Equilibrium 4) Monopolistic Competition (B) Match
Chapter 7 In Between the Extremes: Imperfect Competition Learning Objectives List the five conditions that must be met for the existence of monopolistic competition. Describe the methods that firms can
The Labour Market: Demand and Supply Learning Objectives Understand that the demand for a factor of production such as labour is derived from the demand for the product and that it will be influenced by
In this chapter, look for the answers to these questions: How is similar to perfect? How is it similar to monopoly? How do ally competitive firms choose price and? Do they earn economic profit? In what
In the Name of God Sharif University of Technology Graduate School of Management and Economics Microeconomics (for MBA students) 44111 (1393-94 1 st term) - Group 2 Dr. S. Farshad Fatemi Perfect Competition
Name: 1. During the long run: Economics 100 Exam 2 A. Output is limited because of the law of diminishing returns B. The scale of operations cannot be changed C. The firm must decide how to use the current
CHAPTER 13B After studying this chapter you will be able to Oligopoly Define and identify oligopoly Explain two traditional oligopoly models Use game theory to explain how price and output are determined
Econ 111 (04) 2nd Midterm A MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Which one of the following does not occur in perfect competition? A)
Chapter 2 The price mechanism Syllabus Content B - The market system and the competitive process 40 % The price mechanism: the demand and supply model and its applications. Page 1 2.1 A market Buyers and
Chap 13 Monopolistic Competition and Oligopoly These questions may include topics that were not covered in class and may not be on the exam. MULTIPLE CHOICE. Choose the one alternative that best completes
A2 Micro Business Economics Diagrams Advice on drawing diagrams in the exam The right size for a diagram is ½ of a side of A4 don t make them too small if needed, move onto a new side of paper rather than
1 of 18 10/19/2013 12:51 PM Which of the following is true about a competitive market supply curve? It is horizontal. It is downward-sloping to the right. It is the sum of the marginal cost curves of all
Goldwasser AP Microeconomics Chapter 16 Monopolistic Competition and Product Differentiation BEFORE YOU READ THE CHAPTER Summary This chapter develops the model of monopolistic competition. It also discusses
Chapter 7: Market Structures Section 1 Key Terms perfect competition: a market structure in which a large number of firms all produce the same product and no single seller controls supply or prices commodity:
ECN 201, Winter 1999 NAME: Prof. Bruce Blonigen SS#: MIDTERM 2 - Version A Tuesday, February 23 **************************************************************************** Directions: This test is comprised
(Perfect) Competition (Perfect) Competition The model of perfect competition is based on the following assumptions: (Perfect) Competition The model of perfect competition is based on the following assumptions:
Perfect Competition What conditions must exist for perfect competition? What are barriers to entry and how do they affect the marketplace? What are prices and output like in a perfectly competitive market?
We now move on to study the economics of different market structures. The spectrum of competition ranges from perfectly competitive markets where there are many sellers who are price takers to a pure monopoly
www.edupristine.com Describe the characteristics of different market structures: perfect competition, monopolistic competition, oligopoly, and pure monopoly Prerequisite Characteristics of different market
GEORGIA PERFORMANCE STANDARDS Microeconomics GEORGIA PERFORMANCE STANDARDS INTERNATIONAL ECONOMICS Microeconomic Concepts SSEMI1 The student will describe how households, businesses, and governments are
Chapter 7 Monopoly, Oligopoly and Strategy After reading Chapter 7, MONOPOLY, OLIGOPOLY AND STRATEGY, you should be able to: Define the characteristics of Monopoly and Oligopoly, and explain why the are
Labelling Graph Axis Correctly The Industry Price S D The Firm Quantity MC AC AR=MR Output Perfect Competition All of the units are sold at the same price because no single buyer or seller is large enough
The Four Conditions for Perfect Competition Perfect competition is a market structure in which a large number of firms all produce the same product. 1. Many Buyers and Sellers There are many participants
1 Integrating the Input Market and the Output Market when Teaching Introductory Economics May 2015 Clark G. Ross Frontis Johnston Professor of Economics Davidson College Box 7022 Davidson, NC 28035-7022
ANSWERS TO END-OF-CHAPTER QUESTIONS 24-1 No firm is completely sheltered from rivals; all firms compete for the consumer dollars. Pure monopoly, therefore, does not exist. Do you agree? Explain. How might
Microeconomics, 2 nd Edition David Besanko and Ron Braeutigam Chapter 13: Market Structure and Competition Prepared by Katharine Rockett Dieter Balkenborg Todd Kaplan Miguel Fonseca Bertrand with complements
Practice Multiple Choice Questions Answers are bolded. Explanations to come soon!! For more, please visit: http://courses.missouristate.edu/reedolsen/courses/eco165/qeq.htm Market Equilibrium and Applications
Page 1 1. Supply and demand are the most important concepts in economics. 2. Markets and Competition a. Market is a group of buyers and sellers of a particular good or service. P. 66. b. These individuals
Introduction to Microeconomics Monopolistic Competition Introduction In this document we refer to imperfect competition as monopolistic competition. Monopolistic competition is described as the situation
I. What is a monopoly market? Monopoly Recall that in the previous chapter on perfect competition we also defined monopoly as follows: 1. Lots of buyers only one seller 2. Single firm is the market. 3.
C H A P T E R 8 Profit Maximization and Competitive Supply CHAPTER OUTLINE 8.1 Perfectly Competitive Markets 8.2 Profit maximization 8.3 Marginal Revenue, Marginal Cost, and Profit Maximization 8.4 Choosing
1 Economics 130-Windward Community College Review Sheet for the Final Exam This final exam is comprehensive in nature and in scope. The test will be divided into two parts: a multiple-choice section and
Partial Equilibrium: Positive Analysis This Version: November 28, 2009 First Version: December 1, 2008. In this Chapter we consider consider the interaction between different agents and firms, and solve
Economics 212 Microeconomic Principles Exam No. 3 Date: 7 or 9 May 2012 Name The value of this exam is 100 points Instructor: Brian B. Young Please show your work where appropriate! Multiple Choice 2 points
Review for the Midterm Exam. 1. Chapter 1 The principles of decision making are: o People face tradeoffs. o The cost of any action is measured in terms of foregone opportunities. o Rational people make
Perfect Competition Chapter 10 CHAPTER IN PERSPECTIVE In Chapter 10 we study perfect competition, the market that arises when the demand for a product is large relative to the output of a single producer.
Market Equilibrium and Applications I. Market Equilibrium In the previous chapter, we discussed demand and supply, both for individual consumers and firms and for markets. In this chapter, we will combine
Chapter 8 Production Technology and Costs 8.1 Economic Costs and Economic Profit 1) Accountants include costs as part of a firm's costs, while economists include costs. A) explicit; no explicit B) implicit;
CHAPTER 9: PURE COMPETITION Introduction In Chapters 9-11, we reach the heart of microeconomics, the concepts which comprise more than a quarter of the AP microeconomics exam. With a fuller understanding
AP Micro Chapter 8 Test Multiple Choice Identify the choice that best completes the statement or answers the question. 1. There would be some control over price within rather narrow limits in which market
University of Pacific-Economics 53 Lecture Notes #8B I. Output Decisions by Firms Now that we have examined firm costs in great detail, we can now turn to the question of how firms decide how much output
Subject CT7 Business Economics Core Technical Syllabus for the 2016 exams 1 June 2015 Aim The aim of the Business Economics subject is to introduce students to the core economic principles and how these
Econ 101 Kong CMP final review session - solution 2014 fall Benji Huang practice monopoly 1 A monopoly make positive economic profit in the long run because. A) can; barriers to entry prevent other firms
Chapter 11 PERFECT COMPETITION Competition Topic: Perfect Competition 1) Perfect competition is an industry with A) a few firms producing identical goods B) a few firms producing goods that differ somewhat
Chapter 05 Perfect Competition, Monopoly, and Economic Multiple Choice Questions Use Figure 5.1 to answer questions 1-2: Figure 5.1 1. In Figure 5.1 above, what output would a perfect competitor produce?
NAME: STUDENT ID: Midterm Exam #2 ECON 101, Section 2 summer 2004 Ying Gao Instructions Please read carefully! 1. Print your name and student ID number at the top of this cover sheet. 2. Check that your
EC 480 SEMINAR 5 Revision: Costs, Revenues & Profit Profit and the aims of a firm Profit is made by firms earning more from the sale of goods than the cost of producing the goods. A firm s total profit
These notes provided by Laura Lamb are intended to complement class lectures. The notes are based on chapter 11 of Microeconomics and Behaviour 2 nd Canadian Edition by Frank and Parker (2004). Chapter
Exam 3 Student Name: Microeconomics Exam Dates: Week 15, late April-early May, 2007 Instructions: I) On your Scantron card you must print three things: 1) Print your full name clearly; 2) Print the day
Managerial Economics 1 is the application of Economic theory to managerial practice. 1. Economic Management 2. Managerial Economics 3. Economic Practice 4. Managerial Theory 2 Managerial Economics relates
Practice Questions Week 8 Day 1 Multiple Choice Identify the choice that best completes the statement or answers the question. 1. The characteristics of a market that influence the behavior of market participants
Equilibrium of a firm under perfect competition in the short-run. A firm is under equilibrium at that point where it maximizes its profits. Profit depends upon two factors Revenue Structure Cost Structure
1 of 20 12/1/2013 1:02 PM The willingness to work a certain amount of time at a given wage rate is known as Labor supply. Labor Derived supply. Derived Labor supply is the willingness and ability to work
Chapter 16 MARKETS WITHOUT POWER Microeconomics in Context (Goodwin, et al.), 3 rd Edition Chapter Summary This chapter presents the traditional, idealized model of perfect competition. In it, you will
C H A P T E R 12 Monopolistic Competition and Oligopoly CHAPTER OUTLINE 12.1 Monopolistic Competition 12.2 Oligopoly 12.3 Price Competition 12.4 Competition versus Collusion: The Prisoners Dilemma 12.5
I. Learning Objectives In this chapter students will learn: A. The significance of resource pricing. B. How the marginal revenue productivity of a resource relates to a firm s demand for that resource.
Chapter 12 monopoly 1. A monopoly firm is different from a competitive firm in that A) there are many substitutes for a monopolist's product but there are no substitutes for a competitive firm's product.
VANCOUVER ISLAND UNIVERSITY ECON211: PRINCIPLES OF MICROECONOMICS Total Marks: 70 MIDTERM EXAM II Duration: 75 Minutes Name (Last, First): ID #: Signature: THIS EXAM HAS TOTAL 12 PAGES INCLUDING THE COVER
ACTIVITY 4-5 How Wages Are Determined in Labor Markets This activity examines how wages and employment are determined in two types of labor s. A perfectly competitive labor is one in which all buyers and
Unit 8. Firm behaviour and market structure: monopolistic competition and oligopoly Learning objectives: to understand the interdependency of firms and their tendency to collude or to form a cartel; to
Chapter 6 Economic Efficiency CHAPTER SUMMARY The central idea in this chapter is Adam Smith s invisible hand. Free-market competition will ensure that the allocation of resources is economically efficient.
Monopolistic Chapter 17 Copyright 2001 by Harcourt, Inc. All rights reserved. Requests for permission to make copies of any part of the work should be mailed to: Permissions Department, Harcourt College
R.E.Marks 1998 Oligopoly 1 R.E.Marks 1998 Oligopoly Oligopoly and Strategic Pricing In this section we consider how firms compete when there are few sellers an oligopolistic market (from the Greek). Small
Summary Chapter 12 Monopoly Defining Monopoly - A monopoly is a market structure in which a single seller of a product with no close substitutes serves the entire market - One practical measure for deciding
Solution 1.SECTION A: MICROECONOMICS a) The concept of equilibrium under demand and supply analysis refers to a situation where at a price the quantity demanded equals the quantity supplied. Graphically,
Pre-Test Chapter 22 ed17 Multiple Choice Questions 1. Refer to the above diagram. At the profit-maximizing level of output, total revenue will be: A. NM times 0M. B. 0AJE. C. 0EGC. D. 0EHB. 2. For a pure
STATE COUNCIL OF EDUCATIONAL RESEARCH &TRAINING VARUN MARG, DEFENCE COLONY, NEW DELHI Teaching- Learning Material (On the basis of weekly syllabus for the Month of July 2011) For Class XII PGT (Economics)
CHAPTER 6 PERFECT COMPETITION, MONOPOLY AND ECONOMIC VERSUS NORMAL PROFIT CHAPTER OBJECTIVES When you have completed this chapter you will understand the distinction between perfect competition and monopoly,
Your consent to our cookies if you continue to use this website.