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UMSL ECON 1001 - Final Exam Study Guide

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Econ 1001 1st EditionFinal Exam Study Guide April 21 – May 7 Look at the powerpoints on MyGateway for chapter questions and possible short answerprompts. Final exam is mostly on chapters 11 and 12, but they will include material from the first 3exams as well. This study guide focuses on chapters 11 and 12, but previously posted study guides will be beneficial to look through as wellChapter 11 – MonopolyImperfect Competition – competition that does not fit the definition of perfect competition either because it involves a smaller number of firms or only one firm, or products that aren’t identical.Monopoly – a firm that faces no competitorsMonopolistic Competition – many firms competing to sell similar but differentiated productsOligopoly – when several large firms have all or most of the sales in an industryBarriers to entry – the legal, technological, or market forces that may discourage or prevent potential competitors from entering a market; ex1: patents/copyrights ……tradeoff = innovation and creativity ; ex2: degrees and franchises (need certain degrees for certain careers such as a doctor or professor…….tradeoff = qualityDeregulation – removing government control over setting prices and quantities in certain industries Patent – a government rule that gives the inventor the exclusive legal right to make, use, or sell the invention for a limited timeTrademark – a word, name, symbol, or device that indicated the source of the goods that can only be used by the firm that registered that trademarkCopyright - a form of legal protection to prevent copying for commercial purposes original works of authorship, including books and musicTrade secrets – Methods of production kept secret by the producing firmIntellectual property – the body of law including patents, trademarks, copyrights, a trade secretlaw that protects the right of inventors to produce and sell their inventionsNatural monopoly – when the quantity demanded in the market is less than the quantity at the bottom of the long-run average cost curveNatural monopolies = economics of scale = high fixed pricesPredatory Pricing – when an existing firm uses sharp but temporary price cuts to discourage new competitionPredatory pricing and Control of physical resources are bad types of monopolies. Ex: oil – standard oil, aluminum - Alcoa, diamonds – de beersMonopolies- Good for producers and bad for consumers- Do NOT have lots of sellers- Do NOT have ease of entry and exit- Overall inefficient, but sometimes for a certain period of time they can be beneficial- Monopolies can be worth it in cases such as electricity or plumbing/well waterBad because…1. Inefficient (deadweight loss)2. Usually bad customer service because they can get away with it3. Usually don’t innovate once they exist; just coast on the good4. High prices, low quantityGraphs….MR is ALWAYS less than demand and less than priceDeadweight loss is the triangle where quantity jumps us to price and over to where MC meets the demand curveMonopoly graph: MR = MC does not equal D = SPerfect Competition graph: MR = MC equals D = SPerfect competitions have: lower prices, higher quantities, no deadweight lossChapter 12: Monopolistic Competition and OligopolyDifferentiated products – products that are distinctive in a particular wayCollusion – When firms act together to reduce output and keep prices highCartel – a group of firms that collude to produce the monopoly output and sell at the monopolypriceGame theory (strategic interdependence) – a branch of mathematics often used by economists that analyzes situations in which players must make decisions and then receive payoffsPrisoner’s dilemma – a game in which if both players pursue their own self-interest, they both end up worse off than if they cooperateDuopoly – an oligopoly with only two firmsKinked Demand Curve – a perceived demand curve that arises when competing oligopoly firms commit to match price cuts, but not price increasesOligopolies and monopolistic competitors produce where MR = MCMonopolistic competition is inefficient BUT the tradeoff is choice for consumersMonopolistic competitions do NOT have a standardized productOligopolies have more than 1, but only few sellersOligopolies have NO ease of entry and exitPerfectcompetitionMonopolyMonopolisticcompetitionOligopolyShort-run +, -, 0 +, -, 0 +, -, 0 +, -, 0Long-run 0 +, -, 0 0 +, -, 0When…- MR > MC increase production/expand- MR = MC **Goal- MR < MC decrease production/fire


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UMSL ECON 1001 - Final Exam Study Guide

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