Upcoming Test Unit Test Chapters 15,16 & 17 Block Day- Free Response (90 pts) Block Day – Multiple Choice (100 pts) Study Guide due Block Day
Perfect Competition Monopolistic Competition OligopolyMonopoly 4 Market Structures Equilibrium Price vs. MC P = MCP > MC Maximize Profit When: MR = MC Long Run Economic Profit No Yes Demand & Marginal Revenue Curve D = MR MC End Result: No DWL Lowest Px Highest Qty Largest DWL Highest Px Lowest Qty
Efficiency Review Allocative Efficiency when P = MC –3 market structures fail as P > MC (monopoly, oligopoly, monopolistic competition) –Only Competitive firms are Allocatively Efficient Production Efficiency when P = min. of ATC –3 market structures fail as P > min of ATC (efficient scale production) –Competitive Firms achieve it only in long run Competitive Markets P = MC (always) P = min of ATC (long run) (Efficient Scale Production) 3 Market Structures P > MC P > min of ATC
Intro: Game Theory Wrap Up Dominant Strategy- best strategy for one player regardless of what the other player chooses Enforceable Equilibrium- is a stable “market” equilibrium. No incentive to move/cheat! Nash Equilibrium – a combination of strategies that each choose “best” choice in response to the other’s choice. Every dominant strategy is a Nash Equilibrium Not every Nash equilibrium is a dominant strategy!
D MR ----------------- Unit ElasticElastic range Inelastic Range ● Elasticity Review Firms will: 1)Operate only in Elastic Portion of Demand 2)Elasticity = 1 when MR = 0 => TR at maximum