Exam 9: Monopolistic Competition and Oligopoly

For a monopolistically competitive firm,price equals average revenue.

Assume that two interior design companies,Alistair and Baine,are competing for customers,and if they both advertise,they would each earn $30 million in profits.If neither advertises,they each earn $50 million in profits.If one advertises and the other doesn't,the firm that advertises earns $40 million in profit while the other earns $20 million in profit. a.Present the information above in the form of a payoff matrix.Let Baine be the row player and Alistair the column player. b.Does each firm have a dominant strategy and if so what is it? c.What is the Nash equilibrium? __________________________________________________________________________________________________________________________________________________________________________________________

eBay is an online auction site where more than 200 million items are auctioned annually.What type of auctions are run on eBay?

One reason why,in the last four decades,the number of new automakers in the world has been very small compared to the past is that _______.

An equilibrium in which each player chooses its best strategy given the strategies chosen by the other players is called a Nash equilibrium.

A monopolistically competitive industry that earns economic profits in the short run will face a more elastic demand curve in the long run.

In the short run,a profit-maximising firm's decision to produce should be guided by whether ______.

Figure 9.12 -Refer to Figure 9.12.The allocatively efficient output for the firm represented in the diagram is ______.

Because many business situations are repeated games,firms may be able to avoid the prisoner's dilemma and implicitly collude to keep prices high.

Consumers in a monopolistically competitive market do not receive any consumer surplus because the price paid for the product exceeds the marginal cost of production.

Table 9.3 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 9.3 shows the demand and cost schedules for a monopolistically competitive firm. -Refer to Table 9.3.The amount of the firm's loss at its optimal output level is _____.

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. __________________________________________________________________________________________________________________________________________________________________________________________

The characteristic below that is not common to monopolistic competition and perfect competition is _____.

A fundamental assumption in game theory is that players do not interact with each other.

A market comprised of only two firms is called a ________.

Figure 9.8 Figure 9.8 shows cost and demand curves for a monopolistically competitive producer of iced tea. -Refer to Figure 9.8.At the profit-maximising output level,the firm will _______.

A monopolistically competitive industry that earns economic profits in the short run will ______.

What are the most important differences between perfectly competitive markets and monopolistically competitive markets? __________________________________________________________________________________________________________________________________________________________________________________________

Firms are more likely to find themselves in a prisoner's dilemma in sequential games as opposed to simultaneous games.

Figure 9.14 -Refer to Figure 9.14.The profit-maximising output level is __________.