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ECON 2113- Midterm Exam Guide - Comprehensive Notes for the exam ( 16 pages long!)

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Department
Economics
Course
ECON 2113
Professor
Dr.Vera Tabakova
Semester
spring

Description
[ECON 2113] Comprehensive spring guide including any lecture notes, textbook notes and exam guides.find more resources at oneclass.com (Chapters 10, 11, and 12) Barriers to entry: restrictions that make it difficult for new firms to enter a market; allows monopolists to enjoy long run economic profit Natural Barriers to Entry • Control of resources • Inability of potential competitors to raise enough capital • Economies of scale - “Bigger is better” (more cost-efficient) Government Created Barriers • Necessary licenses and qualifications • Patents and copyright law • Patent: temporarily grants monopoly rights to a product; incentive to innovate • Copyrights (and higher resulting prices) sometimes create unintended consequences (file sharing, movie pirating) Natural monopoly: a monopoly exists because a single large firm has lower costs than any potential competitor *Breaking up the firm into multiple competitors may increase costs as well Price maker: sets the price choosing output level Market failure: operate inefficiently (deadweight loss) • Restrictiting output and charging higher prices compared to competitive markets • Less choices for consumers Rent seeking: competition among rivals to secure monopoly profits (inefficient) • Produces one winner without the other usual benefits of competition Price discrimination: a firm sells the same good to different consumers at different prices for reasons NOT associated with cost differences Perfect price discrimination: firm charges a unique price to each consumer equal to their maxium willingness to pay • Reservation price: max willingness to pay • There will be zero consumer surplus • Product differentiation: contrasting a products unique qualities w/competing products Markup: the difference between Price and Marginal Cost • Possible when a firm has market power and sells a differentiated product • Results in consumers paying more 1 find more resources at oneclass.com
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