Microeconomics Lecture 16 Key Concepts
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The document discusses concepts related to microeconomics including monopolistic competition, oligopoly, and game theory. Monopolistic competition involves many firms with differentiated products where competition causes profits to disappear in the long run as demand curves flatten. Oligopoly is characterized by a small number of interdependent firms where complex strategies like collusion, dominant strategies, and Nash equilibriums are used. Game theory analyzes strategic interactions using rules, strategies, and payoffs.
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Microeconomics Lecture 16 Key Concepts
- 3. Questions?
- 4. What is Price Discrimination? Charging each customer the highest price they are willing to pay.
- 5. Name three companies that price discriminate in Laie Movie Theater Restaurants PCC
- 6. Q P Perfect Competition Marginal Cost MC Average Cost ATC Total Cost $ Quantity Profit Demand=MR Total Revenue
- 7. Marginal Cost MC Q P Marginal Revenue MR Monopoly Average Cost ATC Cost $ Q Profit Demand Deadweight Loss Consumer Surplus 1. MR=MC? 2.TR= P x Q 3.TC=ATC x Q 4. Profit =TR-TC or (P-ATC) x Q
- 8. Are any of these firms monopolists and why?
- 10. Number Marginal Cost Total Cost Average Cost 1 5 2 4 3 6 4 9 5 16
- 11. Number Marginal Cost Total Cost Average Cost 1 5 5 5 2 4 9 4.5 3 6 15 5 4 9 24 6 5 16 40 8
- 12. Number Marginal Cost Total Cost Average Cost 1 40 2 60 3 90 4 160 5 250
- 13. Number Marginal Cost Total Cost Average Cost 1 40 40 40 2 20 60 30 3 30 90 30 4 70 160 40 5 90 250 50
- 14. Number Marginal Cost Total Cost Average Cost 1 300 2 420 3 600 4 800 5 1500
- 15. Number Marginal Cost Total Cost Average Cost 1 300 300 300 2 540 840 420 3 960 1800 600 4 1400 3200 800 5 4300 7500 1500
- 17. Q $ Monopolistic Competition D MR Short Run Long Run Steep Demand Demand Flattens
- 18. Q $ Short Run Long Run D MR MC ATCProfit Profits disappear in the long run due to competition High Price Large Quantity Lower Price Lower Quantity QSQ PPS L L Demand Flattens Profit Monopolistic Competition
- 19. D MR MC Competition flattens the Demand Curve and squeezes profits. Profits
- 20. Q $ Market Competition Short Run Demand Short Run Marginal Revenue Long Run Demand Long Run Marginal Revenue Marginal Costs Average Total Costs QSR PSR QLR PLR
- 21. Monopolistic Competition Brand Competition Most firms are in this category Temporary Monopoly
- 22. Continuous Innovation Create Profits Use Profits to Create Repeat
- 23. Strategy Make profits before you lose your monopoly
- 26. Perfect Competition Monopoly Monopolistic Competition Oligopoly Number of Firms Many One Many Few Type of Product Identical Unique Brands Similar Ease of Entry Easy Blocked Easy Hard Demand D = MR D > MR Dynamic Game Theory Examples Commodities Rice Apples Utilities Government Brands Coke Apple STC-Mobily HyperPanda Danube Pairs
- 27. Collusion Dominant Strategy Nash Equilibrium Cooperative Equilibrium Non-cooperative Equilibrium Key Terms
- 28. Oligopoly Small number of interdependent firms compete
- 29. Oligopoly Cannot use usual methods Demand curves not obvious Complex Strategy
- 30. Oligopoly Don’t know Demand Curve Don’t know Marginal Revenue curve Don’t know where to find profit maximization point
- 32. Prisoner's Dilemma Pursuing the Dominant Strategy Results in Non-Cooperation and Leaves Everyone Worse Off
- 34. John Nash (1928 - 2015 ) Game Theory Nash Equilibrium Nobel 1994 A Beautiful Mind
- 37. Five Competitive Forces Existing Firms Potential Firms Substitutes Buyers Suppliers