Exam 14: Oligopoly and Monopolistic Competition

Scenario: The fixed cost of producing 500 units of Good Y is $25,000, while the variable cost of producing 500 units of Good Y is $60,000. -Refer to the scenario above.Which of the following will happen if the equilibrium price charged by a firm producing Good Y in the short run is $130?

Which of the following is true?

The floral industry in Rose Valley has a Herfindahl-Hirschman Index of 900.This implies that the flower market in Rose Valley is ________.

La Dila and Swiss Pro are the only two firms in an industry.The firms initially charge equal prices for their products,which are perfect substitutes.What happens if La Dila decides to lower its price slightly?

Scenario: There are two firms in an industry, Firm A and Firm B, and they consider entering into a colluding agreement. If the two firms collude, then they agree that they would both produce less than what they would if they were competing against each other in an oligopolistic market. Since Firm A expects Firm B to produce a small quantity of output in the colloding agreement, Firm A is facing a demand curve with the same slope but with a higher intercept. The following figure depicts demands that face Firm A in both the colluding agreement and the oligopolistic market. -Refer to the figure above.What is the profit that Firm A can get by cheating on the collusive agreement?

Scenario: The fixed cost of producing 500 units of Good Y is $25,000, while the variable cost of producing 500 units of Good Y is $60,000. -Refer to the scenario above.If the market for Good Y is monopolistically competitive,a firm producing Good Y will shut down production in the short run if price falls below ________.

Long-run equilibrium in a monopolistically competitive industry requires the representative firm to earn zero economic profits,because ________.

Scenario: There are several pen manufacturers in Corinthia. However, the pens sold by each manufacturer have a unique design. -Refer to the scenario above.How will the demand for pens faced by the existing pen manufacturers in Corinthia be affected if several firms exit the industry in the long run?

The table below summarizes the information possessed by a firm in a monopolistically competitive market. Quantity demanded is in thousands of units. -Refer to the table above.The maximum profit earned by the firm is ________.

The marginal revenue curve of a monopolistic competitor ________.

In which of the following market structures do firms produce the level of output where Marginal revenue = Marginal cost?

An oligopoly model in which sellers compete on prices rather than quantities is called a ________ model.

Why do some firms in an oligopoly refrain from colluding?

Why does a monopolistically competitive industry result in a lower level of output than does perfect competition?

Suppose a monopolistically competitive industry has five firms; the two largest each have a 30 percent share of the market and the remaining three firms each have a 20 percent share of the market.If the two largest firms merge,the Herfindahl-Hirschman Index increases by ________ points to ________.

Markets in which the Herfindahl-Hirschman Index ________ are considered moderately concentrated.

Scenario: The market demand for soccer balls in a small town is 2,500 units, and there are two rival sports brands selling soccer balls in this town, Sporty and Go! The products of the two brands are identical. -Refer to the scenario above.Each firm will face a demand of ________ units of Good A if both of them charge a price of $60.

The following figure shows the demand curve (DD), the marginal revenue curve (MR), and the cost curves of a monopolistic competitor. -Refer to the figure above.What does the region ABCPₑ denote?

Which of the following is a difference between a monopolistically competitive market and a monopoly in the long run?

Crisps and Smith's are the only two bakeries that sell cookies in a small community.Crisps sells butter cookies,while Smith's sells chocolate cookies.Which of the following will happen if Smith's lowers its price for cookies slightly below Crisps's price?