Exam 11: Monopolistic Competition and Oligopoly

Figure 11-8 Figure 11-8 shows cost and demand curves for a monopolistically competitive producer of iced-tea. -Refer to Figure 11-8.Based on the diagram,one can conclude that

You are planning to open a new Italian restaurant in your hometown where there are three other Italian restaurants.You plan to distinguish your restaurant from your competitors by offering northern Italian cuisine and using locally grown organic produce.What is likely to happen in the restaurant market in your hometown after you open?

A monopolistically competitive market is described as one in which there are

The demand curve of a monopolistically competitive firm

Why are demand and marginal revenue represented by the same curve for a firm in a perfectly competitive market,but by separate curves for a firm in a monopolistically competitive market?

Table 11-9 Alistair's (A) Choices Baine's (B) Choices Increase advertising budget Leave advertising budget as is Increase advertising budget A: \ 30,000 profit B: \ 30,000 profit A: \ 10,000 profit B: \ 50,000 profit Leave advertising budget as is A: \ 50,000 profit B: \ 10,000 profit A: \ 40,000 profit B: \ 40,000 profit Alistair Luggage and Baine Baggage are the only firms selling luggage in the upscale town of Montecito. Each firm must decide on whether to increase its advertising spending to compete for customers.If one firm increases its advertising budget but the other does not, then the firm with the higher advertising budget will increase its profit. Table 11-9 shows the payoff matrix for this advertising game. -Refer to Table 11-9.Does Alistair have a dominant strategy and if so,what is it?

Figure 11-17 -Refer to Figure 11-17.What is the productively efficient output for the firm represented in the diagram?

The study of how people make decisions in situations where attaining their goals depends on their interactions with others is called

Ocean Spray is considered to be an oligopoly firm because,until the 1990s,it faced little competition in the market for fresh and frozen cranberries.Why?

Consider two single-malt whiskey distillers,Laphroaig and Knockando.If they advertise,they can both sell more whiskey and increase their revenue.However,the cost of advertising more than offsets the increased revenue so that each distiller ends up with a lower profit than if they do not advertise.On the other hand,if only one advertises,that distiller increases its market share and also its profit. a.Construct a payoff matrix using the following hypothetical information: If neither distiller advertises: each earns a profit of $35 million per year.If both advertise: each earns a profit of $20 million per year.If one advertises and the other does not: the distiller who advertises earns a profit of $50 million and the distiller who does not advertise earns a profit of $9 million. b.If the two distillers agree to coordinate their strategies,what is the outcome?

Figure 11-15 -Refer to Figure 11-15 to answer the following questions. a.What is the profit-maximizing output level? b.What is the profit-maximizing price? c.What is the average total cost at the profit-maximizing output level? d.What area represents the firm's profit? e.At which output level are economies of scale exhausted? f.Does this graph most likely represent the long run or the short run? Why?

A monopolistically competitive firm can increase its profits beyond the long-run equilibrium break-even level by deliberately lowering its price to force some of its competitors out of the market.

A dominant strategy is

On November 7,1996,the Distilled Spirits Council of the United States decided to end its voluntary ban on television and radio liquor advertisement.The ban on hard liquor advertising had been in effect since 1936 for radio and 1948 for television.Did the lifting of this ban likely increase or decrease the profits of hard liquor companies? Briefly explain.

If a typical monopolistically competitive firm is making short-run losses,then

Which of the following is true for a firm with a downward-sloping demand curve for its product?

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.What are the profit-maximizing/loss-minimizing output level and price?

In San Francisco there are many restaurants that specialize in a wide variety of cuisines.Patronage at these restaurants is influenced by factors such as tastes,price and location.This market is

Figure 11-11 -Refer to Figure 11-11.What is the monopolistic competitor's profit maximizing price?

Explain why OPEC is caught in a prisoner's dilemma?