Give an example of a fixed input.
 

Building, Equipment

Give an example of a variable input
 

Labor, Supplies

What are the threee assumptions of the model for Perfect Competition?
 

Many firms
Each firm produces a similar (homogenous) product
Buyers and sellers have all of the relevant information
Firms have easy entry and exit
 

What are the threee assumptions of the model for Monopolies?
 

One seller
Sells a product for which there are no close substitutes
There are extremely high barriers to entry
 

Give an example of a natural monopoly
 

Subway, Electical Utility (at least in times past)

What is arbitrage?
 

Buying a good in one market where the pricwe is low and selling it in another in which the price of the good is high.

What does it have to do with  price discrimination?
 

    If arbitrage is possible, price discrimination will fail.

What are three problems with monoplies?

Rent Seeking
X-inefficiency
Price Discrimination

What is an example of a firm or an industry that is characterized by monopolistic competition?
 

Corner Store, Coca Cola

Why is cheating an issue for cartels?

    There is an incentive to cheat to raise revenues and consequently profits.

What did Joseph Schumpeter believe about monopolies?
 

That in the long run, they were a force of progress,
That they succeeded because of innovation,
That they were not a long run issue, that they were succeeded by other monopolies - the gales of monopolistic competition  
 
 

What is the difference between the capture theory of monopoly and the public interest theory of monopoly?
 

Public Interest theory holds that government regulators are characterized by diligent commitment to the public interest,
but the capture theory holds that vested interests eventually take control of the regulatory agencies.