SIDES GAME

Profit Max. Q 40

Unregulated Price 3

Social Optimal Price ~2.3ish

Fair Return Price 2.1ish

Unregulated Profit $40

Fair Return Profit ZERO duh P(AR) = ATC

Unit Elastic Q 50 (MR=0)

Outline DWL

Monopolistic Competition LRATC curve will be TANGENT to D/AR curve

Fair Return Price will allow the Monopolist to earn No accounting profit No economic profit A normal profit No economic loss A little economic profit

What will happen to the unregulated monopolist’s quantity of output if Total Fixed Cost increases? NOTHING!!!

Which type of efficiency do monopolistically competitive firms produce? Allocative nope Productive nope

What is the gap between the profit max What is the gap between the profit max. Q and the Productively efficient Q for a monopolistically competitive firm called? Excess capacity

Which market structures earn zero long run economic profit? Perfect and monopolistic competition

Collusion that occurs without actual communication between firms is called TACIT

Which market structure has highly interdependent firms? OILIGOPOLY

This occurs in a payoff matrix when neither player acting unilaterally can improve his payoff. NASH Equilibrium

A player who is best off playing a single strategy regardless of his competitor's strategy has this. Dominant Strategy

What is White’s Dominant Strategy? HIGH

A monopoly should decrease production if MR < MC

What is the Nash Equilibrium? This is a dominant Strategy Nash Equilibrium. Both White and Yellow have a dominant Strategy of “high”

What is the Dominate Strategy Equilibrium? See Previous Slide

Does price discrimination increase or decrease consumer surplus?

Which market structure ALWAYS features product differentiation? Monopolistic competition

Colluding oligopolistic firms are called a A cartel

Cartels (without cheating) operate like monopoly

Which will change output? Lump sum tax Lump sum subsidy Per unit tax Per unit subsidy Per unit shifts MC which changes the profit maximizing quantity. Lump sum only affect fixed and total costs, which will alter profit, but not quantity.

Consumer surplus under a monopolist employing perfect price discrimination? ZERO!

Unregulated monopolies sell less at a higher price

What grade will you earn on tomorrow’s test? If you know all of this stuff, then the answer is an “A” Look up FRQs from past tests Check out some youtube videos for any concept your unsure of. Read through the appropriate unit of your CRACKING THE AP MICROECONOMICS EXAM