1. one seller of good or service

2. no close substitutes

1. economies of scale, high fixed cost, low marginal cost, "natural monopoly"

2. control of raw materials

ex. diamond industry

-patents

-public franchises

ex. United States Postal Service

-licensing

ex. taxis

• take mkt price
• firm's D curve is perfectly elastic
• mkt D is downward sloping
• P and MR are the same

• have control over P charged
• must consider trade off between P and Q_d
• face downward sloping D curve for their product
• always underproducing relative to the efficient level of output

1. many firms (firms act independently of one another)
2. differentiated product (perceived or actual)
3. free entry and exit

• many firms
• perfect info
• homogenous output
• no barriers

Type of Repeated Game:

Finite

• always get competitive outcome
• play a fixed number of times, known in advance

Type of Repeated Game:

Infinite

• many different possibilities
• play multiple times, but don't know when will stop

respond to cheating by cheating and

respond to cooperating by cooperating

Perfect Price Discrimination

aka 1st degree P discrimination

charge each consumer the maximum price willing to pay, extract all consumer surplus

ex. auctions

different prices to different groups based on elasticity of demand

intertempored price discrimination

ex. movie tickets

1. change in labor productivity
2. price of out in the mkt ↓ LD ↓ W ↓ L ↓
3. assumes mkt adjusts easily
4. wages are "sticky" downward

1. income effect: wage ↑ income ↑

buy normal goods-work less

2. substitution effect: W ↑ Pleasure ↑ consume less-work more

• experience
• competence
• education
• occupation/job req
• PT/FT
• gender
• ethnic
• discrimination

• many small labor mkts
• all wage differentials are based upon human capital differentials

• invest in skills ( MPP ↑)
• receive a return for investment

• employers look for signals that indiv is high productivity
• only high productivity people get signal

• different occupations
• same industry
• negotiate wages above w* without shifting S&D
• ex. Long Shore Workers/ UAW

• centered around occupation
• ↑ W by ↓ LS

uses their market power to higher less

-unions arise

When Marginal Revenue is..

positive..

negative..

zero..

Then Demand is..

...price elastic

...price inelastic

...unit price elastic

o         Determine the demand, marginal revenue, and marginal cost curves

o         Select the output level at which the marginal revenue and marginal cost curves intersect

o         Determine from the demand curve the price at which that output can be sold

   the difference between what consumers are willing to pay for a good and what they actually pay. It is measured by the area under the demand curve and above the price of the good over the range of output produced.

-          the price charged by the firm and other aspects of its behavior may be subject to regulation

-          the alternative to a single firm is many small, high-cost producers.

-          a market structure with more than one firm in an industry in which at least one firm is a price setter.

-          has a degree of monopoly power, either based on product differentiation that leads to a downward-sloping demand curve or resulting from the interaction of rival firms in an industry with only a few firms.

1. one in which many firms compete, each offering a slightly different product.

2. one in which the industry is dominated by a few firms.

-          A firm that operates to the left of the lowest point on its average total cost curve

-          A way to measure the degree to which output in an industry is concentrated among a few firms

-          Reports the percentage of output accounted for by the largest firms in an industry.

Firms that coordinate their activities through overt collusion and by forming collusive coordinating mechanisms 

  cartels are generally illegal They are banned because their purpose is to raise prices and restrict output.

-          The outcome of a strategic decision

-          The payoff in an oligopoly game is the change in economic profit to each firm.

1.  A price-setting firm- the firm must have some degree of monopoly power- it must be a price setter

2. Distinguishable Customers- the market must be capable of being fairly easily segmented- separated so that customers with different elasticities of demand can be identified and treated differently

3.  Prevention of Resale- the various market segments must be isolated in some way or another to prevent customers who are offered a lower price from selling to customers who are charged a higher price

-          The amount that an additional unit of a factor adds to a firm's total revenue during a period

-          First, it increases the firm's output. Second, the increased output increases the firm's total revenue.

-          We find marginal revenue product by multiplying the marginal product (MP) of the factor by the marginal revenue (MR).

-          The amount a factor adds to a firm's total cost per period

-          Marginal factor cost (MFC) is the change in total cost (ΔTC) divided by the change in the quantity of the factor (Δf):

Complementary factors of production- When an increase in the use of one factor of production increases the demand for another

Substitute factors of production- two factors are this if the increased use of one lowers the demand for the other.

o         factor demand is derived from the demand for the product that uses the factor in its production.

-          We can determine the demand curve for any factor by adding the demand for that factor by each of the firms using it.

-          If more firms employ the factor, the demand curve shifts to the right.

-          A reduction in the number of firms shifts the demand curve to the left.

Economists think of ____as a problem in which individuals weigh the opportunity cost of various activities that can fill an available amount of time and choose how to allocate it.

• changes in preferences
• changes in income
• changes in expectations
• changes in technology
• changes in population
• changes in related goods or services