Economics Review Paper
Economics 101
Fall 2006
The Final Review Sheet (Prof. Kelly)
Note: This is a list of important and key points for topics after the second midterm. This list should be used together with the previous two review lists as the final will be cumulative. As before, these review sheets should serve as a checklist for you to see whether you have studied everything you need to for the final. To do well in the final, you should focus on your lecture and section notes, as well as the practice questions. Good luck in your study!
MONOPOLY
1. Definition and fundamental sources of Monopoly.
---Barriers to entry (examples?): a. exclusive ownership of a key resource; b. exclusive right assigned by the government; c. economies of scale; d. threat of force or sabotage.
2. Natural Monopoly.
---arises where it’s more efficient for a single firm to serve the society. (Examples? What will happen if we have more than one firm in the market?)
3. Profit Maximization Condition (for a single-price monopoly): MR=MC.
a. The demand curve facing a monopoly is the same as the industry demand curve;
b. MC and ATC are similar to those for perfectly competitive firms;
c. MR is less than the price: MR oligopoly price > competitive price.
d. the size of an oligopoly: an oligopolistic market looks MORE like a competitive market if there are MORE sellers in the oligopoly!
4. Some Game Theory.
a. Definition--- a situation where the players or participants' payoffs depend both on own actions as well as on rival's actions.;
b. Four elements to describe a game. 1. players; 2. rules: when each player moves, what actions are possible, what is known to each player at the moment they move…; 3. outcomes; 4. payoffs as a function of the outcomes.
c. Dominant Strategy;
IMPORTANT EXAMPLE: Prisoner’s Dilemma! (Definition? What real-life situations can be represented as a prisoner’s dilemma game?)
d. public policy toward oligopolies.
---restraint
Fall 2006
The Final Review Sheet (Prof. Kelly)
Note: This is a list of important and key points for topics after the second midterm. This list should be used together with the previous two review lists as the final will be cumulative. As before, these review sheets should serve as a checklist for you to see whether you have studied everything you need to for the final. To do well in the final, you should focus on your lecture and section notes, as well as the practice questions. Good luck in your study!
MONOPOLY
1. Definition and fundamental sources of Monopoly.
---Barriers to entry (examples?): a. exclusive ownership of a key resource; b. exclusive right assigned by the government; c. economies of scale; d. threat of force or sabotage.
2. Natural Monopoly.
---arises where it’s more efficient for a single firm to serve the society. (Examples? What will happen if we have more than one firm in the market?)
3. Profit Maximization Condition (for a single-price monopoly): MR=MC.
a. The demand curve facing a monopoly is the same as the industry demand curve;
b. MC and ATC are similar to those for perfectly competitive firms;
c. MR is less than the price: MR oligopoly price > competitive price.
d. the size of an oligopoly: an oligopolistic market looks MORE like a competitive market if there are MORE sellers in the oligopoly!
4. Some Game Theory.
a. Definition--- a situation where the players or participants' payoffs depend both on own actions as well as on rival's actions.;
b. Four elements to describe a game. 1. players; 2. rules: when each player moves, what actions are possible, what is known to each player at the moment they move…; 3. outcomes; 4. payoffs as a function of the outcomes.
c. Dominant Strategy;
IMPORTANT EXAMPLE: Prisoner’s Dilemma! (Definition? What real-life situations can be represented as a prisoner’s dilemma game?)
d. public policy toward oligopolies.
---restraint