Exam 11: Monopolistic Competition and Oligopoly

Table 11-6 Godrickporter's (G) Choices Star Connections' (S) Choices Increase advertising budget Leave advertising budget as is Increase advertising budget :\ 16,000 profit :\ 8,000 profit :\ 12,000 profit :\ 15,000 profit Leave advertising budget as is :\ 8,000 profit :\ 10,000 profit :\ 6,000 profit :\ 12,000 profit Godrickporter and Star Connections are the only two airport shuttle and limousine rental service companies in the mid-sized town of Godrick Hollow. Each firm must decide on whether to increase its advertising spending to compete for customers. Table 11-6 shows the payoff matrix for this advertising game. -Refer to Table 11-6.Let's suppose the game starts with each firm adhering to its original budget so that Godrickporter earns a profit of $6,000 and Star Connections earns a profit of $12,000.Is there an incentive for any one firm to increase its advertising budget?

For a downward-sloping demand curve,marginal revenue decreases as quantity sold increases.

Suppose two firms in a duopoly implicitly collude and charge a high price.How might each firm benefit from advertising that it will match the lowest price offered by its competitor?

Table 11-3 Quantity Price (dollars) Total Revenue (dollars) Total Variable Cost (dollars) Total Cost (dollars) 0 \ 21 \ 0 \ 0 \ 50 1 20 20 16 66 2 19 38 31 81 3 18 54 45 95 4 17 68 59 109 5 16 80 75 125 6 15 90 93 143 7 14 98 112 162 8 13 104 140 190 9 12 108 180 230 10 11 110 230 280 Table 11-3 shows the demand and cost schedules for a monopolistically competitive firm. -Refer to Table 11-3.If this firm continues to produce,what is likely to happen to the product's price in the long run?

An example of a barrier to entry is

If a monopolistically competitive firm lowers its price and,as a result,its total revenue decreases then

The "Discount Department Stores" industry is highly concentrated.What does this mean?

Table 11-4 Quantity Total Marginal Total Marginal Sold Price Revenue Revenue Cost Cost Profit 0 \ 10 \ 0 \ldots \ 2 \ldots -\ 2 1 9 9 8 2 8 16 13 3 7 21 17 4 6 24 20 5 5 25 22 6 4 24 26 Table 11-4 lists estimated revenues and costs (per week)for plastic vials (100 vials per box)for the Victoria Biological Supplies Company.Victoria sells plastic vials to university and private research laboratories. -Refer to Table 11-4.At Victoria's profit-maximizing output

Table 11-1 Quantity Price (dollars) Total Revenue (dollars) 1 \ 7.50 \ 7.50 2 7.00 14.00 3 6.50 19.50 4 6.00 24.00 5 5.50 27.50 6 5.00 30.00 -Refer to Table 11-1.The Table shows

Monopolistic competition is a market structure in which

The breakfast cereal industry has a four-firm concentration ratio of 78 percent.Is this enough information to classify the industry as an oligopoly? Is a high concentration ratio evidence that an industry is not competitive?

Table 11-4 Quantity Total Marginal Total Marginal Sold Price Revenue Revenue Cost Cost Profit 0 \ 10 \ 0 \ldots \ 2 \ldots -\ 2 1 9 9 8 2 8 16 13 3 7 21 17 4 6 24 20 5 5 25 22 6 4 24 26 Table 11-4 lists estimated revenues and costs (per week)for plastic vials (100 vials per box)for the Victoria Biological Supplies Company.Victoria sells plastic vials to university and private research laboratories. -Refer to Table 11-4.Victoria's profit-maximizing quantity sold (Q)and price (P)are:

An oligopolistic industry is characterized by all of the following except

What effect does the entry of new firms in a monopolistically competitive market have on the economic profits of existing firms in the market? How might existing firms attempt to counteract this effect?

If a monopolistically competitive firm is producing 50 units of output where marginal cost equals marginal revenue,total cost is $1,674 and total revenue is $2,000,its average profit is

Figure 11-11 -Refer to Figure 11-11.What is the allocatively efficient output for the firm represented in the diagram?

The people firms hire to attempt to convince state legislators and members of Congress to pass laws that are favorable to the economic interests of the firms are called

Which of the following is not a characteristic of a monopolistically competitive firm in long-run equilibrium?

Which of the following statements is true about monopolistically competitive firms?

If a firm faces a downward-sloping demand curve,