Diablo Valley College Average Cost Market Competition Monopoly & Oligopoly Questions Chapter 22: How are costs divided? (TVC,TFC). Graph the curves. How

Diablo Valley College Average Cost Market Competition Monopoly & Oligopoly Questions Chapter 22:

How are costs divided? (TVC,TFC). Graph the curves.

How would you calculate the average cost curves? How about the MC?(check MC on graph it is plotted between quantity units)

Graph the average and marginal cost curves.

What is the law of diminishing marginal product?- also called diminishing returns.

What is the reason why this change in total product takes place?

Graph both the total product and the marginal product and explain how one relates to the other.

Graph the marginal product and the MC curves and explain the shape of each.

Explain the long run AC curve. Explain where you are experiencing economies to scale and where you are having diseconomies to scale. Discuss reasons?

Chapter 23

Define a market under perfect competition. Give examples of this type of market. How does the market demand curve differ from the demand curve faced by one individual producer in this market?

What does it mean that a producer is a price taker?

How come the individual demand curve is also equal to the price, marginal revenue and average revenue?

How does the TR curve of the perfectly competitive firm look? What does the slope of the line represent if quantity is going up by one unit at a time? Why?

What is the goal of a producer under pure competition? (max profits). Where does this take place?(MR=MC). Why? Explain and graph

How can you calculate the profits? (more than one way ). Show profits using TC, TR curves. Show profits using per unit cost and revenue curves. Graph and shade area of profit. How would you calculate profits using marginal profit?

Explain the concept of minimizing losses. Give a numerical example using TR,TC,TVC,TFC. Graph the situation and shade the area of the loss.

When a purely competitive industry experiences economic profits, what will happen as a result? Explain and graph the initial situation and the subsequent changes that will take place.

What is the short-run supply curve? Why? Graph.

Explain and graph the long run equilibrium for a purely competitive firm.

Compare and contrast a constant cost, increasing cost and decreasing cost industries.

Chapter 24 – Monopoly

Using the 4 characteristics presented in class, define a monopoly. How does the market demand and the individual demand curves differ?

Discuss the barriers to entry in a monopolistic market. What is a cartel?

Since the demand curve for a monopoly is downward sloping, how does the MR curve look? How come price is higher than the MR? Explain using examples.

Using the demand curve and the MR curve for a monopoly, show where the demand curve is elastic, unit elastic and inelastic. (see lecture notes)

What is a monopolist trying to achieve (max profits)? At what point does this take place? Using an ATC, AR and MR, MC show the quantity that you will produce and the price that you will charge. Graph and explain. How would you calculate the profits on this graph?

How does the TR curve look for a monopolist? (go back to the chapter on elasticity and you will see the graph of a TR curve for a downward sloping D curve)

What is price discrimination? How is it used and why?

What are the social costs of a monopoly? Look at price and quantity produced in pure competition and under monopoly.

What is a natural monopoly? What price would you allow the natural monopolist to charge? (according to AC or MC and why?)

Chapter 25: monopolistic competition

Define a market under monopolistic competition. How does it differ from pure competition?

What role does advertising play in promoting competition in this market?

How does the monopolistically competitive demand curve differ from that of a monopoly? What does this imply?

Using a no economic profit situation, show how pure competition would benefit the economy more than a monopolistically competitive market (P, Q, employment, consumer surplus, minimum ATC)

Graph a monopolistically competitive firm experiencing economic profits. What happens as a result? What would be the long run equilibrium for that firm? Explain and graph

Chapter 26 = oligopoly

Define an oligopoly. Explain the shape of the individual demand curve faced by an oligopolist. Do they produce homogeneous or differentiated goods? Give examples.

Explain the reason why there is price rigidity in an oligopoly. How would competitors react if you were to raise price, decrease price? What will be the impact on TR?

What is the importance of a price leader? Is collusion legal? Why?

What does the game theory “prove”?

How do oligopolists deter entry into the market? Explain and discuss.

How does advertising differ in an oligopoly setting, as compared to pure competition, monopoly and monopolistic competition.