Chapter 18

Chapter 18 covers the Factors of Production.
The factors of production include
 land: all natural resources necessary to create a good
 labor: the effort people put into making the good
 capital: assets invested in the firm by the firm for future production
One of the ideas you get out of this chapter is that in order to maximize profit
Firms hire workers up to the point where the value of the marginal product of labor equals the wage
 If they don't then they are losing money and must lay off some workers to be profitable
A firm's decision to hire is based on the value of the marginal product
Profit maximizing firms will hire at a point where value of marginal product is equal to wages
Changes in one market of a factor of production affects the other factors involved in the firm

Ch. 17

An oligopoly is a market with:
Few sellers
Similar products
Example of an imperfect competition
Simplest version is a duopoly with 2 firms and decide the quantity to sell.
They collude to form a cartel and act as a monopoly.
They don't collide for self interest:
Difficult to agree, self interest
Higher quantity, lower price and profit
Nash Equilibrium
Cheating=Pursuing own self interests.
Oligopolists form cartels and they collide over the production and price of goods.
Collusion is an agreement among firms in a market.
Firms act with self interest at a price that maximizes profit.
They use strategies like Nash Equilibrium.
Firms produce more than monopoly and less than competitive.
As number of sellers grow, the more the graph begins to look competitive.
The prisoners' dilemma shows why it is difficult for oligopolies to work.

Chapter 16

Monopolistically competitive markets are a combination of perfectly competitive and a monopoly.
Thus the firm's are:
Price takers due to competition.
Price makers because they sell slightly different products.
Monopolistically competitive markets are characterized by:
Lots of firms
Differentiated Products:
Advertisements
Brand Names
Free Entry
They produce on the downward sloping portion of ATC at a price above marginal cost.
They cause deadweight loss because price is above market cost.
Their goals are to promote brand loyalty that can be irrational at times.
These markets aren't easily government fixed like the other monopolies.

Chapter 15

This chapter is about monopolies.
It discusses how they are formed.
It discusses how they make profit.
It discusses their welfare cost.
A monopoly is a firm that is a sole seller of a product without close substitutes.
The firms become price makers.
The marginal revenue of monopoly firms arent a straight line because they hold market power.
Monopolies still produce where marginal revenue is equal to marginal cost.
Monopolies can be inefficient but are able to be regulated.

Chapter 13

This chapter is about the production of goods and the cost of that production.
Costs and production may vary as they increase.
The amount of goods made may increase at a smaller amount every time another employee is added.
All kinds of costs of production must be taken into account by suppliers to maximize profits.
Industrial organization is the study of how firms' decsions about prices and quantities depend on the market conditions they face.
A firm's average total cost is total cost divided by the quantity of the output, and its marginal cost is the amount by which total cost rises if output increased by 1 unit.

Chapter 11

Chapter 11 is about different goods in the market and how they can be separated.
They can be excludable or rival in consumption.
An excludable good, is a good that can cause people to be prevented from using the good, usually involving price.
A rival in consumption means that one person's use of a good reduces another person's ability to use the same good.
These are are exemplified using the Punnet Square.
The different types of goods are public, private, common resource, and natural monopoly.
A public good is a good that is neither rival in consumption nor excludable.
A private good is excludable and rival in consumption.
A common resource is rival in consumption, but isn't excludable.
A natural monopoly is excludable, but isn't rival in consumption.
Public goods are government made and have positive externalities.
Private goods are government made and have negative externalities.

Chapter 10

This chapters talks about the affects of externalities.
Externalities occur when important economic interactions take place outside of the market so the true cost of the good isn't shown.
Negative externalities cause the social cost of a good to be above the supply curve.
Positive externalities put the social cost of a good above the demand curve.
Both of them create market inefficiency.
The two ways to solve externalities is through private policy or government regulation.
The government's way to solve these inefficiencies is through taxes and subsidies.
Negative externalities should be taxed.
Positive externalities should be subsidized.