Microeconomics Oligopoly and Pricing Quiz

Microeconomics

• Oligopoly Market is a market structure where there are a few firms that dominate the market.
• Duopoly is a specific type of oligopoly where there are only two firms.
• Factor Pricing is the study of how the prices of factors of production, such as labor and capital, are determined.
• Wage Determination in a Competitive Labor Market is influenced by supply and demand forces.
• Bilateral Monopoly occurs when there is a single buyer and a single seller in a market.
• Predatory pricing is a strategy used by firms to gain market share by temporarily selling products below cost to drive out competitors.
• General Equilibrium is a situation where all markets in an economy are in equilibrium simultaneously.
• Walras' Law states that in a general equilibrium model, the sum of excess demands across all markets equals the sum of excess supplies.
• Welfare Economics is the study of the relationship between the allocation of resources and social welfare.
• Product Market is where goods and services are bought and sold.
• Factor Market is where factors of production, like labor and capital, are bought and sold.
• Efficiency Criterion: Pareto Optimality is achieved when it is impossible to make one person better off without making someone else worse off.
• Compensation Principle suggests that if a change in resource allocation makes some individuals better off and others worse off, it is considered a welfare improvement if the winners can compensate the losers.
• Kaldor-Hicks Welfare Criterion states that a change in resource allocation is a welfare improvement if the gainers from the change could compensate the losers and still remain better off.
• Scitovsky Double Criterion emphasizes that a welfare improvement must be Pareto optimal.
• Bergson Criterion uses a social welfare function that reflects society's preferences to determine welfare improvements.
• Little Criterion focuses on the impact of trade on individual income in determining welfare improvements.
• Social Welfare Function represents how society values different allocations of resources, reflecting collective preferences.
• Asymmetric information is when one party in a transaction has more information than the other.
• Marginal Rate of Substitution (MRSxy) measures the rate at which a consumer is willing to trade one good (X) for another good (Y) while maintaining the same level of utility. It is calculated: (No. of units sacrificed of good-x / No. of units gained of good-y)
• Budget Line shows all the possible combinations of two goods that a consumer can purchase given their income and the prices of the goods.
• Budget Set is the set of all affordable bundles of goods given a consumer's income and market prices. The equation for a budget set is: PxQx + PyQy <= M, where (Px and Py) are the prices, (Qx and Qy) are the quantities, and (M) is the income.
• Shifts in the Budget Line occur when the consumer's income, price of good-X, or price of good-Y changes.
• Consumer's Equilibrium occurs when the consumer achieves maximum satisfaction given their income and market prices.
• Related Goods can be substitutes or complements.
• Substitute Goods can be used in place of each other to satisfy a given want, for example, tea and coffee.
• Complementary Goods are used together to satisfy a want, for example, tea and sugar.
• Normal Goods see their demand increase when income increases.
• Inferior Goods see their demand decrease when income increases.
• Tastes and Preferences play a significant role in shaping consumer demand.
• Expectation of Price Change can lead to changes in demand for a good, like increasing demand if a price increase is expected.
• Exceptions to the Law of Demand include Veblen goods, Giffen goods, fear of shortage, and necessities.
• Veblen goods are goods whose demand increases as their price increases due to the perceived prestige associated with higher prices, like diamonds.
• Giffen goods are a special type of inferior good where the income effect outweighs the substitution effect, leading to a rise in demand as the price increases.
• Fear of Shortage can cause a surge in demand for a good even if the price rises.
• Necessities are essential goods with relatively stable demand regardless of price changes.
• Movement along a Demand Curve occurs due to a change in the price of the good.
• Shift in the Demand Curve occurs when factors other than price change, such as income, tastes, or prices of related goods.
• Substitution Effect measures the change in the quantity demanded of a good due to a change in its relative price, keeping real income and the level of satisfaction constant.
• Income Consumption Curve (ICC) shows the combinations of goods that a consumer chooses at different income levels, keeping the prices constant.
• Engel Curve shows the relationship between the quantity demanded of a good and income.
• Price Consumption Curve (PCC) shows the combinations of goods that a consumer chooses at different prices of one good, keeping other factors constant.

Test your understanding of microeconomic concepts related to oligopoly markets and factor pricing. This quiz covers topics such as wage determination, bilateral monopoly, and general equilibrium. Challenge yourself with questions on predatory pricing and welfare economics as well.