Economics 1021A/B Chapter Notes -Big-Box Store, Monopoly Profit, Marginal Cost

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24 Apr 2012

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ECON 1021A/B Full Course Notes

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The firms in oligopoly might produce an identical product and compete only on price, or they might produce a differentiated product and compete on price, product quality, and marketing. Natural or legal barriers prevent then entry of new firms. Natural or legal barriers to entry can create oligopoly. Economics of scale and demand can create a natural oligopoly. Duopoly is an oligopoly market with two firms. There is no room in this market for three firms. But id there were only one firm, it would make an economic profit and a second firm would enter to take some of the business and economic profit. A legal oligopoly arises when a legal barrier to entry protects the small number of firms in a market. Because barriers to entry exist, oligopoly consists of a small number of firms, each of which has a large share of the market.

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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

35. If your competitors will follow your price cuts and ignore price hikes, your firm:
A. faces perfect competition.
B. faces a kinked demand curve.
C. is the marginal price leader of an oligopoly.
D. must be the most efficient firm in the industry.

36. Sticky prices in oligopoly markets are:
A. represented by the kinked demand curve model.
B. typical of cartels.
C. most common for highly differentiated products.
D. a result of price discrimination.

37. Oligopoly is characterized by all of the following except:
A. some industries that produce identical products.
B. frequent price wars.
C. high barriers to entry.
D. prices that are above the minimum of the ATC curve.

38. Which statement is false?
A. A monopoly is both a firm and an industry.
B. A monopoly is an imperfect competitor.
C. There are monopolies in the United States at the regional and local levels.
D. None of these statements is false.

39. Each of the following is a legal barrier to entry into an industry except:
A. government licensing.
B. patents.
C. government franchising.
D. All of these choices are legal barriers.

40. Which one of these is not a natural monopoly?
A. A local electric company
B. A local natural gas company
C. A local cable TV company
D. All of these choices are examples of natural monopolies.

whitecod944

The four types of market structures we study in economics are perfect competition, monopoly, oligopoly, and monopsony.

True / False?

coffeellama194

Economics 1021A/B Chapter Notes -Big-Box Store, Monopoly Profit, Marginal Cost

ECON 1021A/B Full Course Notes

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