Topics for Final Exam

The final exam will be comprehensive. You will want to review the
Topics for Exam II and Topics for Exam 1.
The following topics have been covered since the second exam

I. Market Structure

A. Industry and individual firm demand

1. competition
2. monopoly
3. oligopoly
4. monopolistic competition

B. Measuring Market Concentration

1. Concentration ratios (CR4)
2. Herfindahl Index

II. Competition

A. Market and representative firm

1. market determines price
2. firm can sell any quantity it desires at market price (infinitely elastic demand)
3. profit maximization (MC=MR)

B. marginal cost and supply

C. profits, losses, and breakeven for the competitive firm

1. compare price to average total cost
2. shutdown conditions: P<AVC

III. The long run

A. competition in the long run

1. profits attract entry
2. losses cause exit
3. long run competitive equilibrium

B. Returns to scale

1. economies of scale
2. constant returns to scale
3. diseconomies of scale
4. minimium efficient scale

IV. Monopoly

A. Profit Maximization

1. quantity from MC=MR
2. Price from demand curve

B. Reasons for Monopoly

1. barriers to entry
2. natural monopoly
3. behavior

C. The monopoly problem

1. high prices, low quantity, excess profits
2. inefficiency
a. market distortions
b. deadweight loss

V. Product differentiation

A. Effects

1. non-price competition
2. increase market power
3. more consumer choices

B. Advertising

1. costs
2. effects
3. social implications

C. Information Policy

VI. Monopolistic Competition

A. product differentiation and price dispersal
B. profit maximization [like monopoly]
C. long run [entry eliminates profits]

VII. Oligopoly

A. Interdependence

1. game theory
a. nash equilibrium (non-cooperative)
b. cooperative equilibrium (joint profit maximization)
2. action and reaction

B. Coordination

1. cartel
2. collusion
3. tacit collusion

C. Mergers

1. horizontal
2. vertical
3. conglomerate

D. Antitrust Policy

VIII. International Economics

A. Trade

1. imports and exports
2. benefits of international trade

B. Protectionism

1. tariffs
2. quotas
3. high costs

C. Free trade Agreements (as time permits)

1. Multilateral
a. GATT
b. World Trade Organization
2. regional
a. NAFTA
b. European Union

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