Chp. 17

Chapter 17 is mainly about oligopolies which are market structures in which only a few sellers offer similar or identical products. It consists of game theory, the study of how people behave in strategic situations. A duopoly is oligopoly with only two members, a collusion is an agreement among firms in a market about quantities to produce or prices to charge, cartel is a group of firms acting in unison (must agree on level of production and amount produced by each seller) would act as a monopoly, but this is often unrealistic because of dividing profit evenly and antitrust laws that prohibit explicit agreements among oligopolists both firms would want to produce based on self interest and then they would over produce.The Nash equilibrium is a situation in which economic actors interacting with one another each choose their best strategy given the strategies that all the other actors have chosen illustrates tension between cooperation and self-interest. When firms in an oligopoly individually choose production to maximize profit, they produce a quantity of output greater than the level produced by monopoly and less than the level produced by competition. The oligopoly price is less than the monopoly price but greater than the competitive price (which equals zero) the output effect: because price is above MC, selling one more gallon of water at the going price will raise profit the price effect is raising production will increase the total amount sold, which will lower the price of water and lower the profit on all the gallons sold (if its smaller than output, then production will increase but if its larger than output, then they will not raise production). As oligopolies produce more they get closer to being like a competitive market (P gets closer to MC and Q produced gets closer to socially efficient level). The dominant strategy is the strategy that is best for a player regardless of the strategies chosen by the other player self interest leads to a negative outcome in the prisoner's dilemma.

Chp. 16

In Chapter 16, Monopolistic Competition is the main topic. The chapter brings up Oligopoly which is a market structure in which only a few sellers offer similar or identical products. A Monopolistic competition is a market structure in which many firms sell products that are similar but not identical (characterized by many firms, differentiated products, and free entry. The equilibrium in a monopolistically comptetive market has excess capacity (operates on the downward-sloping portion of ATC) and each charges a price above marginal cost. In monopolistic competition, there is a standard deadweight loss (because of the mark up of price over marginal cost) and also the number of firms in the market can easily be two large or too small. Invisible hand does not ensure that the total surplus is maximized under monopolistic competition. Product-variety externality: because consumers get some consumer surplus from the introduction of a new product, entry of a new firm conveys a positive externality on consumers. Business-stealing externality: because other firms lose customers and profits from the entry of a new competitor, entry of a new firm imposes a negative externality on existing firms. Depending on whether a positive or negative externality is larger, a monopolistically competitive market could have either too few or too many products. And Advertising is a debated subject because some believe they are manipulative to one’s taste but others argue that it is used as a way to provide information to possible customers.

Chp. 15

Chapter 15 is about Monopolies. Within the market for a monopoly are barriers of entry Monopoly resources: a key resource required for production is owned by a single firm (ex. Companies supplying water), Government regulation: the government gives a single firm the exclusive right to produce some good or service (ex. Copyright), and Production process: a single firm can produce output at a lower cost than can a larger number of producers. Natural monopolies: a monopoly that arises because a single firm can supply a good or service to an entire market at a smaller cost than could two or more firms. Monopolies are Less concerned with other firms trying to enter the market and People that would enter the market would know that they cannot benefit from the same things that monopolists benefit from because they couldn’t achieve the same low costs and ATC curve continually declines. The trend of a monopolist’s demand curve is downward sloping curve because the monopoly has to accept a lower price if it wants to sell more output. The Monopolist’s marginal revenue is always less than the price of its good because of its downward sloping curve Output effect: more output is sold, so Q is higher, which tends to increase total revenue. The price effect: the price falls, so P is lower, which tends to decrease total revenue and Because the price on all unites sold must fall if the monopoly increases production, marginal revenue is always less than the price.

Chp. 14

Chapter 14 brings up competitive market again which are markets with many buyers and sellers trading identical products so that each buyer and seller is a price taker firms can freely enter or exit the market. Terms also discussed again are average revenue: total revenue / quantity sold (= the price of the good), marginal revenue: the change in total revenue from an addition unit sold , firms want marginal revenue to exceed marginal cost, and therefore it would increase the quantity produced to raise profit. The price of a firm's output is the same regardless of the quantity that the firm decides to produce  and trends are: if marginal revenue is less than marginal cost the firm can increase profit by reducing production, if the marginal revenue is greater than marginal cost, the firm should increase its output, if the marginal cost is greater than the marginal revenue the firm should decrease its output at the profit maximization level of output, marginal revenue and marginal cost are exactly equal shutdown is short-run decision not to produce anything during a specific period of time because of current market conditions and exit is long run decision to leave the market. firm that shuts down has to pay fixed costs, but exit does not have to pay for anything. shutdown if TR