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Econ 202 Chpt 14-16

Arbitrage by buyers
A firms effort to increase profit by price discrimination
According to the law of one price
if transaction costs are zero, identical goods should sell for the same price everywhere
Harry sold baseball cards where he knew they would sell for more. So the profits he earned are
Arbitrage profits
if a monopolost practices perfect price discrimination
consumer surplus will be zero
Suppliers will charge a higher price to those people who have a
low price elasticity
electronic products are introduced at high prices then tend to fall over time. what causes this?
after satisfying deman for early adopters, firms lower price to attract the more price sensitive customers
Walt Disney World charges different customers different prices for admission. This is an example of
price discrimination
Transaction costs refer to
costs in time and other resources that parties incur in the process of agreeing to and carrying out an exchange of goods or services
Law of one price
identical products should sell for the same price everywhere
Yield management and price discrimination have enabled firms to increase profits and, at the same time
capture some consumer surplus
Yield management is the practice of
using buyer data to rapidly adjust prices
A monopoly firms demand curve
is the same as the market demand curve
compared to a monopolistic competitor, a monopolist faces
a more inelastic demand curve
If a theatre company expects 250000 in ticket revenue from five performances and 288000 in revenue if it adds the 6th performance
the marginal revenue of the 6th perf. is 38000
Network externalities
exist when the usefulness of a product increases with the number of consumers who use it
the only firms that do not have market power are
firms in perfectly competitive markets
To be a natural monopoly a firm must
have economies of scale that are so large that it can supply the entire market at a lower cost than two or more firms
A firm would have a monopoly if
there is no other firm selling a substitute for its product close enough that its economic profits are competed away in the long run
A four firm concentration ratio measures
the extent to which industry sales are concentrated among the four largest firms in the industry
A patent is a gov’t imposed entry barrier because
it gives a firm the exclusive right to a new product for a period of 20 years from the date the product is invented
A table that shows possible patoffs
Payoff Matrix
As word processing on personal computers expanded, sales of typewriters bagan to disappear. Which of Porters competitive forces does this demonstrate?
competition from substitute goods or services
Patents, Tariffs and quotas are all eamples of
Government Imposed barriers
Sequential games are used to analyze
situations in which one firm acts and other firms respond
the study of how people make decisions in situations in which attaining their goals depends on their interactions with others is called
game theory
What is the dominant strategy in a second price auction?
Bidding ones true value
Which of the following is not among porters competitive forces?
Changing consumer tastes

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