question
An increase in product differentiation created by advertising in a market with many firms will the elasticity of demand facing the firm:
answer
Decrease
question
Suppose a single oligopolistic firm is charging a price where industry marginal revenue is equal to marginal cost. This firm will be tempted to prices, because it faces a more demand if it alone changes its price.
answer
Lower; elastic
question
An oligopolistic industry with the same costs as a monopoly will have prices:
answer
Lower than or equal to a monopoly price.
question
Which of the following is true for a profit-maximizing monopolistic competitor?
answer
Marginal cost = marginal revenue
question
A monopolistically competitive firm in the long run will produce an amount that is _______ the quantity where average cost is at a minimum and charge a price that is _______ marginal cost.
answer
less than; greater than
question
Compare the levels of economic profits in a long-run equilibrium for a perfectly competitive firm, a monopoly, a monopolistically competitive firm, and an oligopoly. Economic profits will most likely be:
answer
zero in perfect competition and monopolistic competition, perhaps positive in a monopoly and perhaps positive in oligopoly
question
Suppose that a local Italian restaurant is operating in a monopolistically competitive environment and is maximizing its profit. The price of spaghetti with meat sauce is $10 and the average total cost is $7. Based on this information, the firm is operating in the _______ and we can expect _______.
answer
short run; firms to enter the market
question
At the Fisherman's Wharf in San Francisco, there are a lot of seafood vendors. Suppose that there are twenty vendors selling steamed crab. If Tommy's crab shack sells 100 steamed crabs per day for $20 each, how much economic profit will Tommy earn in the long run? (Assume that the seafood vendors are operating in a monopolistically competitive market.)
answer
0
question
Tony's Gas Station and Robert's Gas Station are the only two gas stations in a small town of Westville. If Tony and Robert collude to earn more profits, which of the following would be true?
answer
Each will limit the amount of gasoline available and raise prices
question
In which of the following markets do sellers act as price takers?
answer
Perfect competition
question
Key features of monopolistic competition
answer
downward-sloping D curve like monopoly despite many firms
produce at MR=MC like monopoly and perfect competition
free entry leads to a leftward shift in D for a particularfirm's product until profit=0
like monopoly, producing where ATC is above its minimum value
produce at MR=MC like monopoly and perfect competition
free entry leads to a leftward shift in D for a particularfirm's product until profit=0
like monopoly, producing where ATC is above its minimum value
question
Why can't you use MC=MR with oilgopolys?
answer
if Firm A lowers its price to increase its output, it can'trely on its own D-curve being fixed while it does so:Firm B might react by lowering its price too, which shiftsFirm A's D-curve to the left as some customers switchfrom Firm A to B
neither firm's D-curve can be drawn without knowing how its competitors would respond
neither firm's D-curve can be drawn without knowing how its competitors would respond
question
Instead of MC=MR, oligopolies use...
answer
use "game theory" approach to analyzing behavior
(a) specify a set of possible actions for each "player"
(b) specify the "payoff matrix" associated with thevarious combinations of actions across firms
(c) Find Nash equilibrium
(a) specify a set of possible actions for each "player"
(b) specify the "payoff matrix" associated with thevarious combinations of actions across firms
(c) Find Nash equilibrium
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