Exam 10: Monopolistic Competition and Oligopoly

FIGURE 10-2 -The profit-maximizing firm illustrated Figure 10-2 operates in a monopolistically competitive industry. Which of the following best explains what happens in the long run?

The theory of monopolistic competition is based on product differentiation.

Which of the following is NOT a source of product differentiation?

In the long run, what do monopolistically competitive firms achieve?

What is the objective of a cartel?

Car rentals at airport kiosks are typically more expensive than car rentals in downtown areas. What is this an example of?

When a company changes its computer software from Oracle to SAP, there are switching costs involved.

What is the term for an industry characterized by relatively few firms controlling most of the production and sale of a product or service?

Two restaurants, in a small town, compete in the market for pizza. Each restaurant must decide whether to charge a high price or a low price. The potential monthly profits for these firms are shown below (in thousands of dollars). FIGURE 10-4 -Referring to Figure 10-4, what is the Nash equilibrium?

What is the biggest difference between monopoly and monopolistic competition?

Two restaurants, in a small town, compete in the market for pizza. Each restaurant must decide whether to charge a high price or a low price. The potential monthly profits for these firms are shown below (in thousands of dollars). FIGURE 10-4 -Referring to Figure 10-4, what can be said about dominant strategies?

Two restaurants, in a small town, compete in the market for pizza. Each restaurant must decide whether to advertise or not. The potential monthly profits for these firms are shown below (in thousands of dollars). FIGURE 10-5 -Referring to Figure 10-5, what is the Nash equilibrium?

In what way is monopolistic competition like perfect competition?

Explain how a monopolistically competitive firm choose their price and output decision.

What will firms that allocate funds to advertising most likely experience?

Oligopolists take into account the actions and reactions of their competitors when making price and output decisions.

FIGURE 10-2 -The profit-maximizing firm illustrated Figure 10-2 operates in a monopolistically competitive industry. Which of the following statements best describes this firm?

When economists use game theory to analyze the strategic behaviour of firms, which of the following do they take into account?

What is the prisoner's dilemma?

Under what circumstances will a profit-maximizing firm in a monopolistically competitive industry shutdown in the short run?