Chapter 17: oligopoly level of difficulty 2

There are four types of market structure, the monopoly, oligopoly which can be specified to be a duopoly, monopolistic competition and perfect competition. Markets with only a few sellers have an oligopoly where tensions exist between self interests and cooperation among other firms. Firms would be better off having cooperation and compromise with each other rather than being driven by their own self-interests. Although this is true, people/ firms would rather have their way  than getting the better deal. Duopolies exist from oligopolies where there are only two members. There may be an agreement on a monopoly outcome or they will become a cartel where the two firms will collide and create agreements amongst each other. Although cartels are possible, there are anti trust laws that determine the valid scenes for forming cartels. Nash equilibrium happens when economic actors chose their best strategy given the strategies that all others have chosen. When the firms individually decide to maximize the profit they make quantity of output greater than the level produced by a monopoly. Competitive price is less than the oligopoly price which is less than the monopoly price. The greater the number of sellers in an oligopolistic market the more it looks like a competitive market. Price may then approach the marginal cost and the quantity produced reaches the socially efficient level. Game theory on the other hand comes with strategic decisions that may lead to the prisoners' dilemma where compromise cannot be reached by firms and everyone is less efficient.

Chapter 15: Monopoly (Level of difficulty 1 2/3)

Monopolies are considered to be market failures, where economic inefficiencies are likely to occur. A monopoly happens when there is a one and only seller in a market, unlike competitive markets where one single firm has little to no effect on the price of a good. This can be represented with a downward sloping curve that shows the demand for the product, where marginal revenue would always be below the price of the good. Just like when competitive firms try to maximize their profit, marginal cost and marginal revenue would be equal, but unlike the competitive firm, in a monopolistic situation the price will exceed the marginal cost. The profit maximum level of output would be below the level that is maximum sum of consumer and producer surplus. The deadweight losses created by monopolies are similar to those caused by taxes. Policymakers try to amend the inefficiencies caused by monopolies with antitrust laws, regulating certain prices, or making a government-run enterprise from that price controlling monopoly. Although there are possible solutions to inefficiencies caused by monopolies, if the market failure is considered to be small, then policymakers do nothing at all. Monopolies may raise profits by chagrining different prices to different consumers, depending on their willingness to pay for that product, the higher the willingness the higher the price, thus more cash-ing. Price discrimination can raise the economic welfare and help lessen deadweight losses, helping the economic well-being of the market. 

Chapter 14: firms in competitive markets( level of difficulty 1 1/2)

In perfectly competitive markets since the price determined by the market is accepted, the people are considered to be price takers. Firms have the goal to maximize profit , and they maximize by creating the greatest difference between total revenue and total cost. Marginal revenue and marginal cost are to be equivalent. Decisions for the firms divide into two categories, shutdowns or exits. In the short run, shut downs are more convenient since sunk costs are not taken into consideration. (Sunk costs being those costs that have already been committed and cannot be recovered. Thus is efficient if the revenue the firm gets is less than the  variable cost of production. On the other hand in the long run and exit pays attention to short costs, where it is efficient if the revenue is less than the total cost. The complete opposite happens when the action is to be profitable, and total revenue exceeds total cost. Enter and exit methods are used to drive profit to zero. Have price equal minimum average total cost, and are horizontal at the pricing. Firms must make zero economic profit where price and ATC are driven to equality. In the long run equilibrium must have firms at efficient scale. Firms stay in business without a profit, and determine to recompensate time and money. In the short run if there is an increase in the demand, total revenue grows, and now profits exceed ATC! Marginal firms would exit the market if it were any lower.