monopoly
1 producer
no competition
no entry possible
another name: price settler
special traits: only 1 firm
Ex. landline phones, railroad, subways, public education
oligopoly
a few producers
primarily nonprice comps
difficult entry
not any names for firms
special traits: firms… conclude and behave as monopolist
Ex. oil, cell phone providers, airlines, invesment banking
monopolistic competition
many producers
non price competition or price comp
easy entry
name: price maker
special traits: product differentiation + branding leads to competition for consumer dollars
Ex. clothing shops, gas stations, grocery stores, athletic wear, fast food restaurants, buisness, home supply stores
perfect competition
great many
price company
free entry
name: price taker
special traits: perfectly elastic demand
market failures
-positive/negative externalities
-imperfect info
-imperfect competition
-adverse selection
-moral hazard
-public goods
-positive/negative externalities
Economic side effects, or third-party effects (externalities), happen when producing or consuming something affects people who aren’t directly involved.
These effects can be positive (like flu shots protecting others) or negative (like texting while driving or noise pollution).
Party wakes whole street up, second hand smoke
imperfect info
-you make decisions based solely on what yk or are familiar with even though there may be better alternatives out there
imperfect competition
when you’re stuck in a situation with no real alternatives, so even if many choices exist in the wider market, only one option is available. This lets the seller raise prices.
Airport food
Gift shops at theme parks
Movie theater snacks
adverse selection
happens when it costs different amounts to serve different customers, but the seller can’t tell who is high-need vs. low-need. This can drive prices up or cause imbalances.
Insurance – sick people buy more, healthy people buy less.
Buffets – big eaters get more value than light eaters.
Tuition/financial aid – schools can’t always tell who will need more resources.
moral hazard
the tendacy for those with insurance against a problem to take fewer precautions to avoid the problems
Ex. laid off workers with unemployment income, skydrivers with life insurance
public goods
Public goods: goods often supplied by the government, where one person’s use doesn’t reduce availability for others (non-rival) and people can’t easily be excluded from using them (non-excludable).
Ex. street lights, sewage system
economic functions of government
-maintaining the legal and social framework
-maintain competition
-provide public goods and services
-correct for externalities
-stabilize the economy
-redistribute income
SCRELP
Stabilize
Competition
Redistribute
Externalities
Legal framework
Public goods
maintaining legal and social framework
city polices increase naighborhood patrols,
lawsuit establishes patent rights, new info from a government agency helps consumers choose wisely
songwruter sues singer says song stolen
protect property rights
maintain competition
agency blocks merger of 2 airlines
anti-trust laws
staples/office depot merger assignment wed/thursday
provide public goods/services
hoemland security funding increased
police/firefighters serve public
streeth lights
military
market failures
correct for externatalities
EPA plan to reduce O2 emission
county funds free flu vaccinations
increased fines for speeding
tickets for texting while driving
this is one of the
major marker failures
stabalize economy
federal reserve raise the interest rate
president says more spending will fight recession
congress extends tax cuts
redistribute income
congress raises taxes for top income brackets
legislature passes funding for subsidized housing
medicad
food stamps
