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Conduct refers to how individual firms behave in the market; it involves ______ decisions, advertising decisions, and decisions to invest in research and development.
Conduct refers to how individual firms behave in the market; it involves ______ decisions, advertising decisions, and decisions to invest in research and development.
pricing
The Four-firm Concentration Ratio measures the fraction of total industry sales produced by the ______ largest firms in the industry.
The Four-firm Concentration Ratio measures the fraction of total industry sales produced by the ______ largest firms in the industry.
four
The Herfindahl-Hirschman Index (HHI) is the sum of the squared market shares of firms in a given industry multiplied by ______.
The Herfindahl-Hirschman Index (HHI) is the sum of the squared market shares of firms in a given industry multiplied by ______.
10,000
In a Perfectly Competitive Market, each firm produces a ______ product.
In a Perfectly Competitive Market, each firm produces a ______ product.
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The Rothschild Index measures the sensitivity to price of a product group as a whole relative to the sensitivity of the ______ demanded of a single firm to a change in its price.
The Rothschild Index measures the sensitivity to price of a product group as a whole relative to the sensitivity of the ______ demanded of a single firm to a change in its price.
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The Lerner Index measures the difference between price and marginal cost as a ______ of the product’s price.
The Lerner Index measures the difference between price and marginal cost as a ______ of the product’s price.
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Integration refers to uniting productive resources through a ______, in which two or more existing firms merge into a single firm.
Integration refers to uniting productive resources through a ______, in which two or more existing firms merge into a single firm.
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There is free entry into and exit from the ______.
There is free entry into and exit from the ______.
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Marginal Revenue is the change in ______ resulting from the sale of one additional unit of a product.
Marginal Revenue is the change in ______ resulting from the sale of one additional unit of a product.
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The ______ function defines the profit-maximizing level of output for a firm.
The ______ function defines the profit-maximizing level of output for a firm.
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Firms in monopolistic competition often produce ______ products.
Firms in monopolistic competition often produce ______ products.
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In a ______ equilibrium, neither firm has an incentive to change its output.
In a ______ equilibrium, neither firm has an incentive to change its output.
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Niche Marketing involves products tailored to meet the needs of a particular ______.
Niche Marketing involves products tailored to meet the needs of a particular ______.
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In a Stackelberg oligopoly, the first firm to choose its output is known as the ______.
In a Stackelberg oligopoly, the first firm to choose its output is known as the ______.
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Green Marketing targets consumers who are concerned about ______ issues.
Green Marketing targets consumers who are concerned about ______ issues.
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In a Bertrand oligopoly, firms engage in price ______ to compete with one another.
In a Bertrand oligopoly, firms engage in price ______ to compete with one another.
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For a competitive firm, MR is the market ______.
For a competitive firm, MR is the market ______.
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A ______ is a market structure in which a single firm serves an entire market for a good.
A ______ is a market structure in which a single firm serves an entire market for a good.
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Economies of Scale exist whenever long-run average costs ______ as output increases.
Economies of Scale exist whenever long-run average costs ______ as output increases.
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A ______ merger involves the integration of two or more firms that produce components for a single product.
A ______ merger involves the integration of two or more firms that produce components for a single product.
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A ______ merger reduces the number of firms that compete in the product market.
A ______ merger reduces the number of firms that compete in the product market.
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The ______ System gives the inventor of a new product the exclusive right to sell the product for a given period of time.
The ______ System gives the inventor of a new product the exclusive right to sell the product for a given period of time.
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In a ______, there are many buyers and sellers, and each firm produces a differentiated product.
In a ______, there are many buyers and sellers, and each firm produces a differentiated product.
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In a ______, there are only two firms in the market.
In a ______, there are only two firms in the market.
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Price ______ is when different consumers are charged different prices for the same good or service.
Price ______ is when different consumers are charged different prices for the same good or service.
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In a ______ market, existing firms cannot quickly respond to new entrants by lowering prices.
In a ______ market, existing firms cannot quickly respond to new entrants by lowering prices.
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______ costs are those that cannot be recovered once paid.
______ costs are those that cannot be recovered once paid.
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Two-part pricing involves a fixed fee plus a ______ for each unit purchased.
Two-part pricing involves a fixed fee plus a ______ for each unit purchased.
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______ pricing is a strategy where higher prices are charged during peak hours.
______ pricing is a strategy where higher prices are charged during peak hours.
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Block pricing often forces customers to make an all-or-none ______ decision.
Block pricing often forces customers to make an all-or-none ______ decision.
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Commodity ______ involves bundling several different products together for sale at a single price.
Commodity ______ involves bundling several different products together for sale at a single price.
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Study Notes
Market Structure
- Factors influencing managerial decisions include the number of competing firms, firm size, technology, costs, demand, and ease of entry/exit.
- Concentration Ratios: Measure the proportion of total industry output produced by the largest firms (e.g., four-firm concentration ratio).
- Herfindahl-Hirschman Index (HHI): Calculates the sum of squared market shares of firms in an industry (multiplied by 10,000).
- Rothschild Index: Measures the sensitivity of a product group's price compared to a single firm's price change.
- Lerner Index: Measures the difference between price and marginal cost as a fraction of the price.
- Integration: Combining productive resources.
- Mergers: Combining two or more existing firms into one.
- Vertical Integration: Combining stages of production within a single firm.
- Vertical Mergers: Combining firms that produce components for a single product.
- Horizontal Integration: Combining production of similar products into a single firm.
- Horizontal Mergers: Reducing the number of competing firms in a product market.
- Conglomerate Mergers: Combining different product lines into one firm.
- Performance: Firm's profitability and social welfare within an industry.
- Structure: Industry factors like technology, concentration, and market conditions.
- Conduct: Firm behavior within a market, influencing pricing, advertising, and investments.
- Dansby-Willig Performance Index: Ranks industries based on social welfare improvements from increased output.
- Causal View: Market structure influences firms' behavior.
Perfectly Competitive Market
- Many buyers and sellers, each small relative to the market.
- Homogenous (identical) product.
- Perfect information for buyers and sellers.
- No transaction costs.
- Free market entry and exit.
- Firm's demand curve equals market price.
- Marginal Revenue (MR): Change in revenue from the last unit sold (equal to market price for competitive firms).
- Monopoly: Single firm serving all the market, with no close substitutes.
Economies of Scale and Scope
- Economies of Scale: Long-run average costs decline as output increases.
- Diseconomies of Scale: Long-run average costs increase as output increases.
- Economies of Scope: Total cost of producing multiple products is lower when produced by one firm than by separate firms.
- Cost Complementarities: Reduced marginal cost of one product when another product's output is increased within the same firm.
Patent System
- Exclusive rights to sell a new product for a set period.
Deadweight Loss of Monopoly
- Consumer and producer surplus lost due to monopolists charging above marginal cost.
Monopolistic Competition
- Many buyers and sellers.
- Differentiated products.
- Free market entry and exit.
- Key difference compared to perfect competition is differentiated products.
Comparative Advertising
- Advertising techniques highlighting a firm's product differentiation from competitors.
Brand Equity
- Additional product value due to brand name recognition and associations.
Niche Marketing
- Tailoring products/services to meet the specific needs of market segments.
Green Marketing
- Niche market approach targeting consumers concerned about environmental issues.
Brand Myopia
- Marketers focusing on past brand success instead of adapting to industry changes.
Oligopoly
- Few large firms, each significant compared to total industry size.
- Duopoly: Oligopoly with only two firms.
- Sweezy Oligopoly: Few firms producing differentiated products, with each firm assuming rivals will cut prices but not increase prices.
- Cournot Oligopoly: Few firms, producing differentiated or homogenous products, where firms assume rivals' output will stay constant if theirs changes.
- Best-Response Function (Reaction Functions): Profit-maximizing output level of one firm given outputs of other firms.
- Cournot Equilibrium: No firm has incentive to change production given other firms' production levels.
- Isoprofit Curve: Output combinations delivering the same level of profit to a firm.
- Stackelberg Oligopoly: Single firm (leader) chooses production before others (followers); followers react to leader's output.
- Bertrand Oligopoly: Few firms, identical products with constant marginal costs, competing in prices.
- Contestable Market: Easy for new firms to enter and exit, all producers having the same technology.
Price Discrimination
- Charging different prices to different customers or groups.
- First-degree: Charging each customer maximum willingness to pay.
- Second-degree: Discrete price schedules for different quantities.
- Third-degree: Pricing different groups of consumers differently.
- Two-part Pricing: Fixed fee plus per unit charge.
- Block Pricing: Bundling identical products.
- Commodity Bundling: Bundling several products.
- Peak-load Pricing: Higher prices during peak periods.
- Cross-subsidy: Using profits from one product to subsidize another.
- Transfer Pricing: Inter-firm pricing for transactions between divisions.
- Price Matching: Matching competitor's lower prices.
- Brand Loyalty: Customers stick with a brand despite lower prices from competitors.
- Randomized Pricing: Intentional price variation to hide price information.
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Description
This quiz explores the various factors influencing managerial decisions in market structures, including concentration ratios, the Herfindahl-Hirschman Index, and integration strategies. Test your understanding of key concepts such as mergers, vertical and horizontal integration, and the sensitivity of prices in competitive environments.
