AP®︎ Microeconomics: Unit 4 Flashcards

Market structures where firms have price-setting power and price exceeds marginal cost.

Monopoly: one seller; oligopoly: few dominant sellers; monopolistic competition: many sellers with differentiated products; monopsony: one buyer in a factor market.

Output is allocatively inefficient because consumers pay a price greater than marginal cost.

Large upfront expenses deter new firms from entering because startup is too costly.

Government protections like patents or licenses give firms exclusive rights and block competitors.

Control of essential inputs prevents rivals from producing and entering the market.

Large firms produce at lower average cost, making it hard for smaller entrants to compete.

Firms sell distinct products and compete through advertising, quality, or service instead of price.

The loss of total surplus caused when output is below the socially efficient level.

In imperfectly competitive markets, the firm's demand curve slopes downward and its marginal revenue curve lies below demand because lowering price to sell one more unit lowers the price received on all units sold.

Obstacles that prevent or discourage new firms from entering a market, such as high startup costs, legal restrictions, control of key resources, or economies of scale.

A market structure with one seller protected by barriers to entry.

A single firm can supply the entire market at lower cost than multiple firms.

Produce where MR equals MC, then charge the price on the demand curve.

At the chosen output, price exceeds marginal revenue and is greater than marginal cost.

Consumer surplus shrinks, producer surplus changes, and deadweight loss appears from underproduction.

A regulated price where price equals ATC, so the firm earns normal profit.

Profit or loss equals the rectangle between price and ATC at the MR = MC output.

The allocatively efficient point occurs where demand equals marginal cost, unlike monopoly output.

Total revenue is maximized where marginal revenue is zero and demand is unit elastic.

Average total cost falls as output increases over the entire market demand.

Charging different buyers different prices for the same good based on willingness to pay.

Charging each unit at each consumer's maximum willingness to pay.

Market power, ability to identify buyers' willingness to pay, and prevention of resale or arbitrage.

A single seller charging one price to all buyers at the quantity where marginal revenue equals marginal cost.

Demand equals marginal revenue because each additional unit is sold at its own reservation price.

Produce the quantity where demand, or price, equals marginal cost.

Consumer surplus becomes zero, and all economic surplus is captured as producer surplus.

It is eliminated because output expands to the allocatively efficient quantity where price equals marginal cost.

Allocatively efficient at P = MC, but not productively efficient unless output also occurs at minimum average total cost.

Economic profit rises because the firm converts consumer surplus into additional revenue.

Revenue is the area under demand up to output, and profit equals that area minus total cost.

An imperfect market with many firms selling differentiated products and easy entry and exit.

Many firms, differentiated products, some price-setting power, low entry barriers, and non-price competition.

Selling similar goods with real or perceived differences in quality, style, branding, or service.

Competing through advertising, branding, packaging, location, or service instead of lower prices.

Output is where MR equals MC, and price is found on the demand curve.

Profit if price exceeds ATC, loss if price is below ATC, and break-even if price equals ATC.

Entry and exit lead firms to earn zero economic profit where demand is tangent to ATC.

Profits attract firms and shift each firm's demand left; losses cause exit and shift demand right.

Firm demand is relatively elastic because many close substitutes are available from rival sellers.

Price exceeds marginal cost, so too little is produced relative to the socially efficient amount.

The lost total surplus from producing less than the socially efficient output where price exceeds marginal cost.

Consumer surplus is below demand and above price; producer surplus is above supply-like cost and below price.

Find quantity at MR equals MC, price on demand, then multiply quantity by price minus ATC.

Find the triangle between demand and MC over the units between actual and efficient output.

Firms produce below minimum ATC in the long run, leaving unused productive capacity.

A market with few interdependent firms, high entry barriers, and inefficient output.

An oligopoly with only two firms competing in the same market.

A condition where each firm's decisions depend on expected reactions from rival firms.

A situation where one firm sets price changes and rival firms tend to follow.

A situation where each player's payoff depends on both their own and others' choices.

A complete plan describing the action a player will take in every situation.

A table showing each player's strategies and the payoff from every strategy combination.

An action that gives a higher payoff no matter what the other player does.

An outcome where no player can gain by changing alone, given others' choices.

A game where each player chooses self-interest, producing a worse outcome than cooperation.

The result when firms act independently, often lowering price and reducing profits.

The minimum payoff increase needed to make another action yield a higher payoff.

An agreement among oligopolists to act like a monopoly by raising price and restricting output.

The result when players work together to maximize their combined payoffs.