Deck 34: Monopolistic Competition and Oligopoly

Question 1

Whats defention of terms:
-cartel

Answer 1

a group of firms that acts as a monopoly

Question 2

Whats defention of terms:
-monopolistic competition

Answer 2

exists in an industry composed of many small firms, each producing a slightly differentiated product

Question 3

Whats defention of terms:
-oligopoly

Answer 3

exists when a few business firms dominate an industry

Question 4

Explain how oligopolies and monopolistic competition differ from competitive markets.
-What conditions for a perfectly competitive market are violated by oligopolies? Monopolistic competition?

Question 5

Explain how oligopolies and monopolistic competition differ from competitive markets.
-Compare and contrast oligopolies and monopolistic competition. What is an advantage for a firm operating in each market structure? Disadvantage?

Question 6

Understand how brands create a monopoly for a product in monopolistic competition.
-Describe how brand names are legally protected. How does this resemble a monopoly?

Question 7

Understand how brands create a monopoly for a product in monopolistic competition.
-Explain how product differentiation leads to competing brands.

Question 8

Explain why advertising is so important to firms in monopolistically competitive markets.
-Explain the link of advertising and brand names (product differentiation) in maintaining profits for firms in monopolistic competition.

Question 9

Explain why advertising is so important to firms in monopolistically competitive markets.
-Demonstrate graphically what happens to profits if more advertising results in more consumers. Now demonstrate what happens to profit if more advertising raises the costs to the firm.

Question 10

Explain why pricing and output decisions of firms in oligopolistic markets are so different from firms in all the other markets.
-Explain why pricing decisions of a firm in an oligopolistic market depend on decisions of other firms. How is this different from decisions of firms in perfectly competitive markets?

Question 11

Explain why pricing and output decisions of firms in oligopolistic markets are so different from firms in all the other markets.
-Compare and contrast explicit and implicit collusion. What are examples of pricing models for explicit and implicit collusion? Explain.

Question 12

What is monopolistic competition?

A) monopolistic competition means there is only one seller in an industry.
B) monopolistic competition means all firms in an industry combine together to act like a monopoly
C) monopolistic competition means a monopolist begins to act competitively
D) monopolistic competition means there is only one seller of a particular brand in an industry with many similar products.

Question 13

A monopolistically competitive firm gains advantage over other firms by

A) selling its product at a lower price than its competitors..
B) convincing customers that its product is exactly the same as others on the market.
C) convincing customers that its product is significantly different from others on the market.
D) producing at a lower cost than its competitors.

Question 14

Compared to a firm operating in a perfectly competitive market, a firm in monopolistic competition

A) produces more output at a higher price.
B) produces less output at a lower price.
C) produces less output at a higher price.
D) produces more output at a lower price.

Question 15

Which of the following is an example of monopolistic competition?

A) Shell Oil company
B) the Shell gas station at 24^th and Vine.
C) Generic, Inc., a grocery store in Albuquerque, New Mexico that sells only generics and items with no brand name.
D) Wal-Mart

Question 16

What is oligopoly?

A) oligopoly means there is many first in an industry selling slightly differentiated products.
B) oligopoly means there are many small firms selling homogenous products.
C) oligopoly means a few business firms dominate an industry.
D) oligopoly means there is only one seller of a particular brand in an industry with many similar products.

Question 17

When would it be most advantageous for an oligopolist to raise its price?

A) when the firm can be sure that other firms will also raise their prices.
B) when the firm can be sure that other firms will not raise their prices.
C) when the firm faces rising costs.
D) when the firm faces declining demand.

Question 18

In the long run, a perfectly competitive firm will make zero excess profits. In the long run, oligopolies

A) also make zero excess profits.
B) normally make excess profits.
C) only the dominant firm makes excess profits, follower firms make zero excess profits.
D) the dominant firm makes zero excess profits, but follower firms will make excess profits.

Question 19

Which of the following is an example of oligopoly?

A) Susie's boutique, an independent clothing store located in Decatur, Illinois.
B) the Shell gas station at 24^th and Vine.
C) Generic, Inc., a grocery store in Albuquerque, New Mexico that sells only generics and items with no brand name.
D) Wal-Mart

Question 20

What is a cartel?

A) a cartel is a group of consumers that get together to buy products in large quantities at substantial discounts.
B) a cartel is a group of commuters who take turns driving together to work.
C) a cartel is a group of firms that acts as a monopoly.
D) a cartel is a group of people who get together to sell illegal substances.

Question 21

Neoclassical economists argue that cartels will eventually break apart because

A) individual producers will have an incentive to charge higher prices in order to attract more customers.
B) individual producers will have an incentive to produce more in order to take advantage of higher prices.
C) individual producers will have an incentive to charge higher prices in order to increase profits.
D) cartels are now illegal in all countries.