question
monopolistically competitive
answer
market with many producers of somewhat different products (in between perfect competition and monopoly)
question
characteristics of monopolistic competition (6)
answer
- many producers
- variety of types of product, each slightly different
- freedom of entry and exit
- lots of information about buyers and other sellers
- freedom of entry and exit
- have information about buyers and sellers
- variety of types of product, each slightly different
- freedom of entry and exit
- lots of information about buyers and other sellers
- freedom of entry and exit
- have information about buyers and sellers
question
monopolistic competition in the short run
answer
- demand = downward sloping
- marginal revenue = downward sloping
- find quantity where MR = MC (profit maximizing)
- find corresponding price on demand curve
- profit is area between market price and average cost up to quantity where MR = MC
- marginal revenue = downward sloping
- find quantity where MR = MC (profit maximizing)
- find corresponding price on demand curve
- profit is area between market price and average cost up to quantity where MR = MC
question
similarity between perfect competion and monopolistic competion
answer
average cost curve = U shape bc MC curve may show decline in MC as the variable input increases, but once firm experiences DMR it will find MC rises as output expands
question
difference between perfect competition and monopolistic competition
answer
cost may be higher for monopolistically competitive firm. may spend more money to differentiate themselves from competitors
question
are monopolistic competitive firms elastic
answer
not as elastic as PCF because there are differences in products
question
what other firm has the same changes in variable and fixed cost as a monopolistically competitive firm
answer
monopoly
question
economic profit equation
answer
(P-AC) x Q or TR - TC
question
what will economic profits look like long term in a monopolistic competition
answer
- competed away
- entry of new firms cause demand to fall until no profits exist
- price = higher than MC
- results in firm producing less than their capacity
- entry of new firms cause demand to fall until no profits exist
- price = higher than MC
- results in firm producing less than their capacity
question
oligopoly
answer
an industry with few producers, high entry barriers, and each one has market power. They compete on price/quantity and may charge the same or different prices
question
features of a oligopoly
answer
- significant entry and exit barriers
- products can be homogeneous or differentiated
- few firms competing
- firms = interdependent
- products can be homogeneous or differentiated
- few firms competing
- firms = interdependent
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what will demand curve look like for an oligopoly if each firm produces a different product
answer
downward sloping
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what will demand curve look like for an oligopoly if firm produces identical products
answer
elastic, at its extreme will be perfectly elastic like PCF
question
cartel
answer
a group of firms who agree formally or informally to work together in ways that will create the advantages of being in a monopoly
question
what can occur in a cartel
answer
- firms can break to earn more profit
- if other firm figure this out and then lower their prices they will continue the process until they would lower their profits, and price could fall to the level at a competitive market
- if other firm figure this out and then lower their prices they will continue the process until they would lower their profits, and price could fall to the level at a competitive market
question
game theory
answer
a mathematical study of strategic interactions between rational actors where the outcome of any actors actions depends on the actions of others
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payoff matrix
answer
a 2 by 2 table with 2 actors/players, each player will have a set of actions that will result in different payoffs, each players payoff is dependent on both players course of action
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prisoners dilemma
answer
a game in which pursuing dominant strategies results in noncooperation that leaves everyone worse off
question
yes or no: price = marginal cost
- PC
-monopolistic c
- oligopoly
- monopoly
- PC
-monopolistic c
- oligopoly
- monopoly
answer
- yes
-no
- no
-no
-no
- no
-no
question
yes or no: average cost as a minimum in long run
- PC
- monopolistic
- oligopoly
- monopoly
- PC
- monopolistic
- oligopoly
- monopoly
answer
- yes
- no
- no
- no
- no
- no
- no
question
yes or no: economic profits in long run
- PC
- monopolistic
- oligopoly
- monopoly
- PC
- monopolistic
- oligopoly
- monopoly
answer
- no
- no
- yes
- yes
- no
- yes
- yes
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