Micro Final Exam Concepts WCC. Production and Cost

Size: px

Start display at page:

Download "Micro Final Exam Concepts WCC. Production and Cost"

Brenda Chase
7 years ago
Views:

1 Micro Final Exam WCC Think you are ready for the next exam? If so, you should be able to define the following terms, discuss the following concepts, and manipulate the following models without referring to the text or notes. Production and Cost Total Physical Product Marginal Physical Product Marginal Revenue Product Fixed Costs Variable Costs Sunk Costs Average Cost Marginal Cost Marginal Revenue Regions of the Total Physical Product Curve Relation of MPP to TPP Determining the best amount of a single input to use Derivation of the Total Cost Curve from the TPP Curve Shapes of, and relationship between, the AFC, AVC, ATC, and MC curves Effects of changes in fixed costs and variable costs on the position of these curves Derivation of the Total Profit Curve from TC and TR curves Determining the best level of output Effects of changes in fixed and variable costs on the profit maximizing level of output

2 Perfect Competition Economic profit Accounting profit Normal profit Productive efficiency Allocative efficiency Price taker Industry characteristics Shape of the short run PC market supply and demand curves Shape of the PC firm s demand curve Equivalency of the PC firm s demand, AR, and MR curves Determining the optimal level of output Determining and illustrating the PC firm s level of profit Shut down conditions Illustrate the PC firm s short run supply curve Difference between economic profit and accounting profit Time frame under which entry and exit can occur Effect of entry and exit on the market and firm supply and demand curves How changes in production costs due to entry and exit affect the shape of the market s long run supply curve Effects of taxes on the PC firm s short run and long run profits Types of advertising one is and is not likely to see under PC What it means to achieve productive and allocative efficiency

3 Monopoly Increasing returns to scale Natural monopoly Barriers to entry Deliberately erected barriers to entry Regulated monopoly Shape of a monopoly s demand and MR curves Ability of a monopolist to set price Determination of the best level of output Persistence of profit Examples of barriers to entry Benefits of advertising Effects of different taxes on a monopolists output and pricing decision Historical versus analytical cost curves Average cost pricing and marginal cost pricing

4 Monopolistic Competition and Oligopoly Cartel Tacit collusion Game Theory Maximin Criterion Dominant Strategy Payoff Nash Equilibrium Grim Strategy Tit for tat strategy Determination of the monopolistically competitive firm s demand and MR curves Short run similarity to monopoly Long run similarity to perfect competition Desirability of advertising Role of strategic interaction in oligopolies Modeling cooperation Cartel formation and goals Legality of cartels and trusts Existence of tacit collusion Modeling lower than expected profits Understanding the Principal Agent problem Usefulness of Game Theory How timing can be important in games How communication can affect the outcome of games How repetition can enforce bargains

5 Antitrust Law and Regulation Price discrimination Tying contracts Interlocking directorates Exclusive dealing contracts Activities prohibited by the Sherman Antitrust Act Per se Doctrine Rule of Reason 3 types of mergers and which one the government is most likely to oppose Calculation and use of 4 firm concentration ratios How the Herfindahl Hirschmann Index improves upon the concentration ratio The logic of the SCP Model How Contestable Markets theory challenges the SCP model

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) The four-firm concentration ratio equals the percentage of the value of accounted for by the four