812: Monopolistic Competition and Oligopoly

question

Extreme form of imperfect competition

answer

Monopoly

question

When many sellers compete to sell a differentiated product, entry not restricted

answer

monopolistic competition

question

Due to large number of firms, no individual firm considers its rivals reaction when setting price or quantity

answer

monopolistic competition & perfect competition

question

Monopolistic Competition: Each firm sells a differentiated product and faces a _______________ sloping demand curve

answer

downward

question

Monopolistic competition has a __________ D Curve

answer

downward sloping

question

Both __________ + __________ have downward sloping demand curve

answer

Monopoly and monopolistic competition

question

Monopolistic competition, in short run, maximize costs at

answer

MC = MR

question

Monoploistic Competition: in long run we have MC = MR and P = _____

answer

question

Two sources of inefficiency arise in monopolistic competition

answer

1. price exceeds MC
2. each firm has excess capacity that it's not utiliziing

question

Focuses on behavior of large firms in markets where there are only a few firms that account for most of the market

answer

Oligopoly

question

Most important rule of Oligopoly

answer

interdependence of firms

question

_______________ must consider rivals short-term and long-term reactions to any change in strategy

answer

Oligopoly

question

Non-cooperative Oligopoly behavior

answer

Cournot, Stackleberg and Bertrand

question

Each firm does the best it can, given what its competitors are doing

answer

Nash Equilibrium

question

Cournot, Stackleberg and Bertrand starts with different assumption about what the firm assumes, but they all apply the ___________ concept

answer

Nash Equilibrium

question

_____________ model -- firms compete by choosing quantities, and all firms make decisions at the same time

answer

Cournot

question

The ________________ for each firm shows how much it will produce as a function of how much it thinks its rival will produce.

answer

Reaction curve

question

Cournot equilibrium occurs at the intersection of

answer

two reaction curves

question

________________ equilibrium: total output level is less than perfect competition, but more than pure monopoly

answer

Cournot

question

_____________ model: firms compete by choosing quantity, but one firm is able to choose first.

answer

Stackelberg

question

Stackelberg, ____________ sets output quantity first, and _________ observes output

answer

leader , follower

question

Being leader gives "first-mover advantage" and leader will produce __________ than follower and earn _______________ profit

answer

more, higher profit

question

____________ Model: model of price competition

answer

Bertrand

question

Each firm must decide which price to set, treating the price of its competitor as fixed.

answer

Bertrand

question

Bertrand: with homogenous products, _______________ is the competitive outcome.

answer

Nash Equilibrium

question

With differentiated products, the equilibrium Bertrand price will be _____________ than under perfect competition but ____________ than under pure monopoly.

answer

greater, less

question

______________ Can be used to illustrate the basic features of a noncooperative game

answer

Game theory

question

_______________ shows the profit to each firm, given its decision and the decision of its rival

answer

payoff matrix

question

Each firm independently does the best it can, taking competitors into account

answer

Prisoner's Dilemma

question

Each firm, trying to maximize profits, will compete aggressively, but both firms would be better off if they cooperated

answer

Prisoner's dilemma

question

In a one-shot game, the competitive outcome will always be the ______________ of the game b/c there is no change of future punishment

answer

equilibrium

question

Explicit agreement between firms to coordinate their activities with the goal of raising price above the competitive level

answer

Cartel

question

Cartel profit maximized where

answer

cartel MR = cartel MC

question

Many firms, no barriers to entry, product differentiation

answer

monopolistic competition

question

___________ is crucial for monopolistic competition

answer

differentiation

question

In a monopolistically competitive market, Price exceeds

answer

question

__________ created in monopolistically competitive market because of markup of price over marginal cost and less output is produced than under perfect competition

answer

DWL

question

Monopolistically competitive firm is inefficient because of

answer

excess capacity -- output is to the left of minimum ATC

question

Oligopoly can arise if ____________________ prevent new firms from entering

answer

barriers to entry

question

Must consider its rivals when making decisions

answer

oligopoly

question

Basic concept for analyzing strategic behavior in Oligopoly is ___________

answer

Nash Equilibrium

question

In __________________ no firm has an incentive to change its action

answer

Nash Equilibrium

question

_____________ each firm must decide how much to produce and the firms make their decisions at the same time.

answer

Cournot model

question

Neither firm can gain by producing a different quantity, given the rival's choice

answer

Nash Eq

question

Total output in Cournot equilibrium lies between

answer

monopoly and competitive

question

First move advantage, aka

answer

Stackelberg

question

Simultaneous output choice

answer

Cournot

question

Firms move sequentially, leader and follower

answer

Stackelberg

question

In Cournot model, firms choose _________________ levels and let the market determine the ______________

answer

output, price

question

Firms are competing by choosing price rather than quantity

answer

Bertrand

question

When two identical firms compete on price, the competitive price is the _______________ price

answer

equilibrium

question

With homogenous products, the Bertrand equilibrium is the competitive equilibrium where p=

answer

question

With differentiated products, price > ________, but are less than what a monopoly would charge

answer

question

Kinked demand curve suggests that rivals will match

answer

price cuts

question

For a cartel to achieve goal, output must be restricted below

answer

competitive level

1 of 55

question

Extreme form of imperfect competition

answer

Monopoly

question

When many sellers compete to sell a differentiated product, entry not restricted

answer

monopolistic competition

question

Due to large number of firms, no individual firm considers its rivals reaction when setting price or quantity

answer

monopolistic competition & perfect competition

question

Monopolistic Competition: Each firm sells a differentiated product and faces a _______________ sloping demand curve

answer

downward

question

Monopolistic competition has a __________ D Curve

answer

downward sloping

question

Both __________ + __________ have downward sloping demand curve

answer

Monopoly and monopolistic competition

question

Monopolistic competition, in short run, maximize costs at

answer

MC = MR

question

Monoploistic Competition: in long run we have MC = MR and P = _____

answer

question

Two sources of inefficiency arise in monopolistic competition

answer

1. price exceeds MC
2. each firm has excess capacity that it's not utiliziing

question

Focuses on behavior of large firms in markets where there are only a few firms that account for most of the market

answer

Oligopoly

question

Most important rule of Oligopoly

answer

interdependence of firms

question

_______________ must consider rivals short-term and long-term reactions to any change in strategy

answer

Oligopoly

question

Non-cooperative Oligopoly behavior

answer

Cournot, Stackleberg and Bertrand

question

Each firm does the best it can, given what its competitors are doing

answer

Nash Equilibrium

question

Cournot, Stackleberg and Bertrand starts with different assumption about what the firm assumes, but they all apply the ___________ concept

answer

Nash Equilibrium

question

_____________ model -- firms compete by choosing quantities, and all firms make decisions at the same time

answer

Cournot

question

The ________________ for each firm shows how much it will produce as a function of how much it thinks its rival will produce.

answer

Reaction curve

question

Cournot equilibrium occurs at the intersection of

answer

two reaction curves

question

________________ equilibrium: total output level is less than perfect competition, but more than pure monopoly

answer

Cournot

question

_____________ model: firms compete by choosing quantity, but one firm is able to choose first.

answer

Stackelberg

question

Stackelberg, ____________ sets output quantity first, and _________ observes output

answer

leader , follower

question

Being leader gives "first-mover advantage" and leader will produce __________ than follower and earn _______________ profit

answer

more, higher profit

question

____________ Model: model of price competition

answer

Bertrand

question

Each firm must decide which price to set, treating the price of its competitor as fixed.

answer

Bertrand

question

Bertrand: with homogenous products, _______________ is the competitive outcome.

answer

Nash Equilibrium

question

With differentiated products, the equilibrium Bertrand price will be _____________ than under perfect competition but ____________ than under pure monopoly.

answer

greater, less

question

______________ Can be used to illustrate the basic features of a noncooperative game

answer

Game theory

question

_______________ shows the profit to each firm, given its decision and the decision of its rival

answer

payoff matrix

question

Each firm independently does the best it can, taking competitors into account

answer

Prisoner's Dilemma

question

Each firm, trying to maximize profits, will compete aggressively, but both firms would be better off if they cooperated

answer

Prisoner's dilemma

question

In a one-shot game, the competitive outcome will always be the ______________ of the game b/c there is no change of future punishment

answer

equilibrium

question

Explicit agreement between firms to coordinate their activities with the goal of raising price above the competitive level

answer

Cartel

question

Cartel profit maximized where

answer

cartel MR = cartel MC

question

Many firms, no barriers to entry, product differentiation

answer

monopolistic competition

question

___________ is crucial for monopolistic competition

answer

differentiation

question

In a monopolistically competitive market, Price exceeds

answer

question

__________ created in monopolistically competitive market because of markup of price over marginal cost and less output is produced than under perfect competition

answer

DWL

question

Monopolistically competitive firm is inefficient because of

answer

excess capacity -- output is to the left of minimum ATC

question

Oligopoly can arise if ____________________ prevent new firms from entering

answer

barriers to entry

question

Must consider its rivals when making decisions

answer

oligopoly

question

Basic concept for analyzing strategic behavior in Oligopoly is ___________

answer

Nash Equilibrium

question

In __________________ no firm has an incentive to change its action

answer

Nash Equilibrium

question

_____________ each firm must decide how much to produce and the firms make their decisions at the same time.

answer

Cournot model

question

Neither firm can gain by producing a different quantity, given the rival's choice

answer

Nash Eq

question

Total output in Cournot equilibrium lies between

answer

monopoly and competitive

question

First move advantage, aka

answer

Stackelberg

question

Simultaneous output choice

answer

Cournot

question

Firms move sequentially, leader and follower

answer

Stackelberg

question

In Cournot model, firms choose _________________ levels and let the market determine the ______________

answer

output, price

question

Firms are competing by choosing price rather than quantity

answer

Bertrand

question

When two identical firms compete on price, the competitive price is the _______________ price

answer

equilibrium

question

With homogenous products, the Bertrand equilibrium is the competitive equilibrium where p=

answer

question

With differentiated products, price > ________, but are less than what a monopoly would charge

answer

question

Kinked demand curve suggests that rivals will match

answer

price cuts

question

For a cartel to achieve goal, output must be restricted below

answer

competitive level

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