Material to be covered in exam #2.

Ch. 22

After studying this chapter you should know

• 1. How the economist's definition of profit differs from that of the
• accountant.
• 2. What distinguishes the short-run from the long-run.
• 3. What is the law of diminishing returns. Marginal product and average product.
• 4. Understand all the cost curves both graphically and on a table.
• 5. How to calculate all costs involved in production

Ch. 23

After studying this chapter you should know

• Characteristics of a perfectly competitive market.
• How much a perfect competitor will produce in the short-run.
• What is the short-run supply curve of a perfectly competitive firm.
• The four possible scenarios facing a perfectly competitive market.
• Why the perfectly competitive market structure is considered to be economically efficient.
• What happens in the long run in a perfectly competitive market?  Why?

   

Ch. 24

After studying this chapter you should know

• Characteristics of a monopoly. (the only supplier of a good or service for which there is no close substitutes, very high barriers to entry, homogeneous product, downward sloping demand curve, economies of scale and governmental restrictions.)
• How to determine how many units to produce, i.e. MR = MC and what price to charge.
• The definition of price discrimination?
• How to regulate a monopoly.

Necessary Conditions for Price Discrimination:

• 1. The firm must face a downward-sloping demand curve.
• 2. The firm must be able to distinguish markets  (segmentation) at a reasonable cost.
• 3. The buyers in the various markets must have different price elastic-
• ties of demand.
• 4. The firm must be able to prevent resale of the product or service.

Ch. 25

After studying this chapter you should know

• Characteristics of an oligopoly. (few, large firms, high barriers to entry, economies of scale, hetero/homogeneous product, lots of advertising, unstable long run equilibrium and fierce interdependence).
• Profit maximization remains the same, produce where MR=MC
• Collusion is a possibility.  (Cartels such as OPEC)  Problems with cheating.
• Concentration ratios and market share are very important for government regulation.
• Characteristics of an monopolistic market. (many firms, low barriers to entry, zero economic profits in the long run, hetero/homogeneous product and lots of advertising)
• Profit maximization remains the same, produce where MR=MC

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