EC 204 Review Questions Third Exam
1. What’s the profit maximizing rule?
2. What’s the difference between accounting and economic profit? Can you calculate each one?
3. What’s the relationship between short run and long run? Can you use a graph to answer questions?
4. How can you tell when a firm should shut down, is minimizing losses, breaking even, making economic profits, economic losses?
5. What are the characteristics of a perfectly competitive firm?
6. When would firms enter/exit a perfectively competitive market?
7. When should a perfectly competitive firm shut down?
8. What’s the shape of a perfectly competitive firm’s demand curve? what‘s the shape of a market demand curve?
9. Do you understand the handout relative to all four firms and the corresponding graphs?
10. Can you illustrate profit and loss on a graph?
11. What’s the relationship between perfect competition and efficiency?
12. What’s the difference between a cartel and a contestable market?
13. How does cost plus pricing work? Is it always profit maximizing?
14. How are the 4 market structures similar? How are they different relative to their characteristics; demand curves, long run profit, etc. Use the handout.
15. What are the barriers to entry? Why do they create barriers?
16. What’s a market niche? What would be examples?
17. What’s price discrimination? What conditions have to exist for a firm to be able to price discriminate? What are some examples?
18. How does elasticity impact price discrimination?
19. What’s the “good thing, bad thing” that happens to a monopolist in terms of lowering price?
20. What’s price leadership?
21. What are the concentration ratio and the Herfindahl Index? How are the calculated? How are they the same/different? What’s their purpose?
22. What’s the relationship between marginal and average costs?
23. What’s a natural monopoly (regulated)? How does it differ from an unregulated monopoly?
24. What are network externalities? Why do they exist?
25. What is game theory? What is the difference between a dominant strategy and Nash equilibrium?
26. How do you use a pay-off matrix to determine Nash equilibriums and dominant strategies?
27. How do you use a decision tree to determine a firm’s dominant strategy?
28. What’s the purpose of advertising? What are the pros and cons of advertising? What impact demos advertising have on ATC?
29. What are the different types of mergers? How does the government define a relevant market? What are the benefits of a merger?
30. What are the five components of Michael Porter’s Competitive Forces Model? How dot the 5 forces influence price?
31. What is arbitrage? How does it work?
32. What are the major pieces of anti-trust legislation? What is the purpose of such legislation? What are the main features of the legislation?
33. What’s odd pricing mean? Why do firms use it?
34. Why do oligopolistic firms to strategic pricing? Why is their mutual interdependence among these firms?