Exam 11: Monopolistic Competition and Oligopoly

There are many wheat farmers in the world,and there are also many McDonald's restaurants in the world.Why,then,does a McDonald's restaurant face a downward-sloping demand curve while a wheat farmer faces a horizontal demand curve?

Figure 11-17 -Refer to Figure 11-17.What is the amount of excess capacity?

Explain the similarities and differences between the long-run equilibrium for a perfectly competitive firm and a monopolistically competitive firm.Illustrate your answer with a graph demonstrating the long-run equilibrium for the two types of firms.

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

If a firm has excess capacity,then

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

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?

Monopolistically competitive firms achieve allocative efficiency but not productive efficiency.

What is the most important difference between perfectly competitive markets and monopolistically competitive markets?

The barrier to entry that allowed Alcoa to make persistent economic profits was ownership of an essential input.

What is meant by the term "government-imposed barrier to entry"? Why would a government be willing to impose barriers to entering an industry?

Table 11-9 Alpha and Beta are the only firms selling gyros in the upscale town of Delphi. Each firm must decide on whether to offer a discount to students to compete for customers. If one firm offers a discount but the other does not, then the firm that offers the discount will increase its profit. Table 11-9 shows the payoff matrix for this game. -Refer to Table 11-9.What is the Nash equilibrium in this game?

A monopolistically competitive firm that is profitable in the short run will face competition that will eventually eliminate the firm's profits in the long run.But the firm can stave off competition and continue to earn economic profits if

Table 11-13 Two rival oligopolists in the coffee industry, Wide Awake and Zuma, have to decide on their pricing strategy. Each can choose either a high price or a low price. Table 11-13 shows the payoff matrix with the profits that each firm can expect to earn depending on the pricing strategy it adopts. -Refer to Table 11-13.Which of the following is true?

If a firm faces a downward-sloping demand curve

If an industry is made up of five identical-sized firms,the four-firm concentration ratio is

Figure 11-14 Figure 11-14 illustrates a monopolistically competitive firm. -Refer to Figure 11-14.It is possible to lower the average cost of production by expanding output beyond Q₀ to Q₁.Why wouldn't a firm expand its output to Q₁?

Figure 11-7 Figure 11-7 shows short-run cost and demand curves for a monopolistically competitive firm in the footwear market. -Refer to Figure 11-7.Which of the following statements describes the best course of action for the firm depicted in the diagram?

A patent is an example of

If a perfectly competitive firm maximizes short-run profits,its marginal revenue will be positive and less than its price.