Ag Econ Exam 3

perfect

mr/mc for the _____ competitor

firms?; small town businesses; no fee for entry

monopolist

monopoly power is lasting and won't go away

monopoly vs. "monopoly power"

monopolist

competitor

outputs

monopolist restrict

perfect competition

most monopolistic company - many buyers and sellers -ID products - no barriers to entry - perfect info - free entry/exit (no market power) - no long run economic power

oligopoly

middle monopolistic company - few firms (sellers) - no barriers - perfect info - free entry/exit - market power

monopoly

least monopolistic company - one seller -barriers to entry - market power - long rune economic profit

product differentiation

- making a product "different" - no matter what's on the can, all beer tastes the same. ex/ advil vs ibuphrofen ex/ lays (more uniform chips than off brand)

oligopoly

- few firms - interdependence (dependent on actions of others)

5

How many models of oligopoly's are there?

kinked demand curve model

- For products in this market, price stays the same as it’s the sole (or only significant) determinant of demand. - model of oligopoly

salop's line

- If you go to the beach and set up a refreshment stand in the middle, it minimizes the beachgoer’s implicit cost of buying stuff from you (in this case, the distance traveled) - The next day, a stand pops up directly next to you in order to segment your market, rinse and repeat. - model of oligopoly

Cournot-Nash

- As the number of firms increases, market production will gradually approach equilibrium - model of oligopoly - "n" firms

stackelberg

- leader/follower dichotomy - the leader is the firm with the lower marginal cost - model of oligopoly

market failure

- anytime market efficiency is hindered - persistant shortages or surpluses

externality

when SOMEONE ELSE is effected in a market --> a "third party"

4 types of externalities

positive and negative production positive and negative consumption

economic impact or apple farmer with his orchard set up near a beekeeper.

example of positive production externality

pollution or mining coal has been linked to adverse health effects, same with burning it.

example of negative production externality

higher education

example of positive consumption externality

ryan and his egg salad sandwich or Fertilizer used to produce crops leaches into groundwater, pesticide use has been linked to public health issues

example of negative consumption externality

private and club goods

government does not need to provide these

public resources and public goods

government enforces these

tragedy of the commons

- public resource - no personal incentive to reserve resources - theory that individuals tend to exploit communal resources ex/ overgrazing

private, club, public resources, and public goods

what are the 4 types of goods?

short run agrigate supply (SRAS)

supply of everything for everyone

agrigate demand (AD)

demand of everything for everyone

inflation

average level of prices rising

demand pull inflation

- increase in demand for everyone - (kind of good)

cost push inflation (supply shock)

- (bad inflation)

rule of 72

- time to double = 72 (inflation/interest rates) - if you notice inflation, it is a problem

command interest formula

fu = pu x (lti)^n fu - future pu - present lti - interest n - years

bertrand

competitors who can only compete with price

game theory

- study of interdependence - (meaning of interdependence: the dependence of two or more people or things on each other)

price floors/ceilings

- a minimum (or maximum) cap on a good

example of an (extreme) price ceiling

-rent control -If the “ceiling” is below the actual market equilibrium, it will affect the market.

example of a price floor

- minimum wage - if this is "binding" then the "floor" is a price over the market equilibrium

consumption externalities

- when consuming a commodity affects an unknown third party

negative consumption externality

when consuming a commodity HARMS the third party

positive consumption externality

when consuming a commodity BENEFITS the third party

private benefit/private cost

what's weighed by the decision maker

consumption externalities

when consuming a commodity affects an unknown third party

production externalities

when producing a commodity affects an unknown third party

negative production externality

when producing a commodity HARMS the third party

positive production externality

when producing a commodity BENEFITS the third party

subsidy

direct payment to someone for consuming or producing a particular commodity ex: scholarships/financial aid ex: out of state tuition is the FULL cost of letting you attend school for a year, in-state tuition is that MINUS the subsidy.

free rider problem

arises when individuals are allowed to consumer more of public goods than their fair share