Exam 9: Monopolistic Competition and Oligopoly

Which of the following conditions distinguishes perfect competition from monopolistic competition?

Under which one of the following market structures are sellers most likely to consider the reaction of rival sellers when they set the price of their product?

In oligopolistic markets:

If the eyeglass industry is monopolistically competitive, then:

Figure 9-E Two cigarette manufacturers (Firm A and Firm B) are faced with lawsuits from states to recover the health care-related expenses associated with cigarette smoking. Both cigarette firms have evidence that indicates that cigarette smoke causes lung cancer (and other related illnesses). State prosecutors do not have access to the same data used by the cigarette manufacturers, and thus will have difficulty recovering full costs without the help of at least one tobacco firm's evidence. Each firm has been presented with an opportunity to lower their liability in the suit if they cooperate with attorneys representing the states. -Refer to Figure 9-E.If both firms follow a dominant strategy, Firm A's profits (losses) will be:

Exhibit 9-A The following diagram depicts monopolistically competitive firms. -Refer to Exhibit 9-A.The firm illustrated in Graph A above maximizes profits (minimizes losses) by producing at level of output ____ and charging price ____.

Figure 9-F Prior to the year 2000, the United States considered renewal of Most Favored Nation (MFN) trading status with China annually (Most Favored Nation trading status is now called Normal Trade Relations). Historically, legislators made threats of not renewing MFN status because of alleged human rights abuses in China. The nonrenewable of MFN trading status would likely have triggered retaliatory measures by China. The game below reflects the potential economic gains from trade in a scenario in which China chooses whether to impose trade sanctions against U. S. firms and the United States chooses whether to renew MFN status with China. -Refer to Figure 9-F.If both countries follow a dominant strategy, the gains from trade for the United Sates will be:

Under conditions of oligopoly markets, firms generally don't like to compete based on price.Why?

Which of the following will not generally be true of a monopolistic competitor operating in the long run?

A monopolistically competitive firm derives its ability to influence price from:

Figure 9-I -Refer to Figure 9-I.The manufacturers of Pepsi and Coca-Cola must each decide whether to launch new ad campaigns to advertise their respective soft drinks.The payoff matrix shows the profits earned from sales of Pepsi and Coca-Cola under alternative advertising scenarios.Based on this information, one can say that:

Bert and Ernie are noncolluding oligopolists.If both choose a high price strategy, each makes $40 in profits; if both choose a low price strategy, each makes $30 in profits.If Bert chooses a high price strategy and Ernie chooses a low price strategy, Bert makes $20 in profits and Ernie makes $60 in profits, while if Bert chooses a low price strategy and Ernie chooses a high price strategy, Bert makes $60 in profits and Ernie makes $20 in profits.Which combination of pricing strategies would you expect Bert and Ernie to adopt if they act independently?

Excess capacity occurs in long-run equilibrium under monopolistic competition so that:

If firms meet together to decide on prices and outputs, it is called:

An industry characterized by only a few firms in the market is called:

The interdependence among oligopoly firms arises because:

Monopolistic competition is characterized by which of the following attributes: i.Many sellers ii.Praduct differentiation iii.Siprificant bariers to entry

If the firms in an oligopoly collude, the results will represent what other type of industry?

Which of the following is not a characteristic of monopolistic competition?

Firms may be tempted to cheat on cartel agreements by: