RESUME FOUNDATION OF ECONOMIC

An assignment written for:

Fondation of Islamic Economic (Pengantar Ekonomi Islam)
Guided by Lecturer:
Royyan Ramdhani Djayusman, M.A.

Written by:
Rafid Rizqullah Nopram

Islamic Economic
Economic and Management Faculty
UNIVERSITY OF DARUSSALAM (CAMPUS GONTOR)
GONTOR PONOROGO
2019/1440

 Behavior of Imperfect Competitors

1. Recall the four major market structures :
a. Perfect Competition is found when no firm is large enough to affect
the market price.
b. Monopolistic Competition occurs when a large number of firms
produce slightly differentiated products.
c. Oligopoly occurs when an industry is dominated by few firms.
d. Monopoly comes when a single firm produces the entire output of an
industry.
2. Measures of concentration are designed to indicate the degree of market
power in an imperfectly competitive industry. Industries which are more
concentrated tend to have higher levels of R&D expenditures, but on
average their profitability is not higher.
3. High barriers to entry and complete collusion can lead to collusive
oligopoly. This market structure produces a price and quantity relation
similar to that under monopoly.
4. Another common structure is the monopolistic competition that
characterizes many retail industries. Here we see many , with only slight
differences in the characteristics of their products (such as different
locations of gasoline stations or different types of breakfast cereals).
Product differentiation leads each firm to face a download-slopping
demand curve as each firm is free to set its own prices. In the long run,
free entry extinguishes profits as these industries show an equilibrium in
which their AC curves are tangent to their demand curves. In this tangency
equilibrium, prices are above marginal costs, but the industry exhibits
greater diversity of quality and service than would occur under perfect
competition.
5. A final situation recognizes the strategic interplay that is present when an
industry has but a handful of firms. When a small number of firms
compete in a market, they must recognize their strategic interactions.
Competition among the few introduces a completely new feature into
economic life: it forces firms to take into account competitors reactions to
price and output decisions and brings strategic considerations into these
markets.
6. Price discrimination occurs when the same product is sold to different
consumers at different prices. This practice often occurs when sellers can
segment their market into different groups.

 Game Theory
1. Economic life contains many situations with strategic interaction among
firms, households, governments, or others. Game theory analyzes the way
that two or more parties, who interact in an arena such as market, choose
action or strategies that jointly affect all participants.
2. The basic structure of a game includes the players, who have different
possible actions or strategies, and the payoffs, which describe the various
possible profits or other benefits that the players might obtain under each
outcome. The key new concept is the payoff table of a game, which
 displays information about the strategies and the payoff or profit of the
different players for all posibble outcomes.
3. The to choosing strategies in game theory is for players to think about
their opponent’s goal as well as their own, never forgetting that the other
side is doing the same. When playing a game in economics or any other
field, assume that your opponent will choose his or her best option. Then
pick your strategy to maximize your benefitm always assuming that your
opponent is similarly analyzing your option.
4. Sometimes a dominant strategy is available one that is best no matter what
the opposition does. More often, we find a Nash equilibrium ( or
noncooperative equilibrium ), in which no player can improve his or her
payoff as long as the other players strategy remain unchanged.