01:220:102 Lecture Notes - Lecture 19: Oligopoly, Marginal Cost, Product Differentiation

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8 Nov 2018

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01:220:102 Lecture Notes - Lecture 18: Market Power, Demand Curve, Marginal Revenue

01:220:102 Lecture Notes - Lecture 19: Oligopoly, Marginal Cost, Product Differentiation

01:220:102 Lecture Notes - Lecture 20: Tacit Collusion, Nash Equilibrium, Oligopoly

Document Summary

Monopolies are not permanently protected from forces of entry and imitation. The main difference between a competitive firm and a monopoly is the length of time that a firm can earn above average profits. Monopolists can earn positive profits in the long run. Barriers to entry: can maintain positive long run profits. Firms will price at the point where (p-mc)/p = 1/e. In the long run the forces of entry and imitation (the development of close substitutes) make the monopolists curve more elastic. The elastic demand will push price down toward marginal cost and will eventually drive economic profits to zero. A few large firms with a high level of output. Oligopoly market structures are characterized by only a few firms, each of which is large relative to the total industry. Typical number of firms is between 2 and 10. An oligopoly market composed of two firms is called a duopoly.

Related Questions

1) A natural monopoly exists when:

a. A few firms collude to make one large firm

b. Firms enter the industry as a result of profit incentives

c. Economies of scale provide large cost advantages to having one firm produce the industry's output

d. Firms naturally maximize regardless of market structure

2) A(n) ____ is a single firm with ___, whereas a(n) ___ implies an industry with ____ firm(s) and ____ .

a. Monopoly; barriers to entry; oligopoly; few; no barriers to entry

b. Oligopoly; no barriers to entry; monopoly; many; easy entry and exit

c. Monopoly; barriers to entry; monopolistic competition; many; easy entry and exit

d. Monopolistic competitor; barriers to entry; monopoly; one; barriers to entry

3) In monopolistic competition:

a. Each firm produces a product identical to that of every other firm in the industry

b. Firms are aware of their strategic interdependence

c. Firms earn large economic profits in the long run

d. Firms earn zero economic profits in the long run

4) A monopolistically competitive industry, such as corn snack chips, and a perfectly competitive industry, like wheat farming, are alike in that:

a. There are many firms in each industry

b. Firms in both types of industries produce similar but not identical products

c. Barriers to entry in both industries are large

d. Firms in both types of industries produce identical products

byzantiumfish483

Which one of the following is correct?

a. Oligopoly firms will ALWAYS be able to make profits in both the short run and long run

b. Monopoly firms can earn profits in the short run, but cannot do so in the long run

c. A perfectly competitive firm can make profits in the short run but will make zero economic profits in the long run.

d. Firms in monopolistically competitive markets can make positive economic profits in both the long and short-run

erinspider108

In a competitive market with identical firms,

a.; free entry and free exit into the market require that firms earn zero economic profit in the long run even though they may be able to earn economic profits in the short run.

b. firms can earn economic profits in the long run if the long-run supply curve is upward sloping

c. an increase in demand in the short run will result in a new price above the minimum of the average total cost allowing the firms to earn a positive economic profit in both the short run and the long run

d. firms can earn a positive economic profit in either the short run or the long run.

pinkwombat37

01:220:102 Lecture Notes - Lecture 19: Oligopoly, Marginal Cost, Product Differentiation

01:220:102 Lecture Notes - Lecture 18: Market Power, Demand Curve, Marginal Revenue

01:220:102 Lecture Notes - Lecture 19: Oligopoly, Marginal Cost, Product Differentiation

01:220:102 Lecture Notes - Lecture 20: Tacit Collusion, Nash Equilibrium, Oligopoly

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