A movement from one point of a demand schedule to another is properly called a change in ______.
Supposed Carmen buys ramen noodles. To determine whether ramen noodles are a normal or inferior good for her, we must observe how Carmen responds to a change in ____, _____, ____, and _____.
- her income
- the price of the noodles
- the price of a substitute
- the price of a complement
When technology advances, supply _______ and the curve moves to the ______.
Name 7 things that shift demand.
- price of related goods
- # of consumers
Name 5 things that shift supply.
- resources (input cost)
- #of suppliers
What changes along the demand curve?
A competitive market is said to exist when... (4 things)
- large number of buyers & sellers
- participants know everything about the market
- sellers produce a homogeneous product
- costless mobility of resources (free participation)
Which type of firm is the best example of perfect competition?
Marginal revenue =
change in total revenue / change in quantity
As a result of competition...
economic actors are price takers
What is windfall?
When you make an above average profit
Marginal cost =
change in total cost / change in quantity
total revenue - total cost
When is there equilibrium?
What is a horizontal merge?
A merge between two like companies
What is a vertical merge?
A merge between two different companies that could work together
What is a conglomerate merge?
A merge between two vastly different companies
What is creditory pricing?
When a company sets prices so low, it kills the competition
Why does creditory pricing not eliminate competition?
Because eventually they have to raise their prices again and then new competitors arise
What is a private good?
A good that posses rivalry and excludability
What is a public good?
A good that is nonrival and nonexcludable
What are externalities?
A side effect or consequence of an industrial or commercial activity that affects other parties without this being reflected in the cost
What is a common resource?
A resource that is rival, but not excludable
What makes a rival good?
If one person consumes it, nobody else can consume it
What makes a nonrival good?
Others can use that good if one consumes it.
What makes an excludable good?
the producer can keep someone from consuming it
What are a cartel's two problems?
- prevent members from competing
- prevent new firms from entering
What is a cartel?
An association of manufacturers or suppliers that maintains prices at a high level and restricts competition
How do licenses to restrict an activity affect that activity?
they raise the cost of engaging in that activity
A law that restricts competitors....
True or False?
Protecting competitors is the same thing as protecting competition.
What is a free rider?
Someone who does not pay for the good they consume
What does the Sherman Antitrust Act do?
prohibits certain business activities that might be anticompetitive, and requires the federal government to investigate and pursue organizations suspected of being in violation
What is an antitrust?
A legislation that controls monopolies so to promote competition
What is the distinguishing characteristic of government?
its generally conceded and exclusive right to use coercion
How is coercion useful?
it can secure the supply of goods by lowering transaction costs