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CAS EC 101 Chapter Notes - Chapter 16: Monopolistic Competition, Market Power, Marginal Revenue

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School
Boston University
Department
Economics
Course
CAS EC 101
Professor
Todd Idson

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CAS EC 101 Full Course Notes
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CAS EC 101 Full Course Notes
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Document Summary

11:07 am: between monopoly and perfect competition. Perfect competition, monopolistic competition and monopoly all maximize profits at. Monopolistic competition and monopoly are not price takers and p > mc. Monopolistic competition allows entry in the long run but cannot earn economic profit. Oligopoly: market structure in which only a few sellers offer similar or identical products. Monopolistic competition: market structure in which many firms sell products that are similar but not identical. Many sellers: firms competing for the same group of buyers. Makes firms not a price taker with a downward sloping demand curve. Competition with differentiated products: the monopolistically competitive firm in the short run. Each firm follows monopolist"s rule: produce where marginal revenue equals marginal cost. Loss: price < atc: the long-run equilibrium. Firms making profits encourages other firms to enter the market, which shifts the demand curve to the left because there are more options.

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Related Questions

1. Which of the following is a characteristic of pure monopoly?

A. close substitute products

B. barriers to entry

C. the absence of market power

D. "price taking"

 

2. An example of a monopoly would be

A. one of many U.S. wheat farmers

B. one of the few U.S. automakers

C. AT&T cell phone service

D. the local water company

 

3. In which market structure do firms exist in very large numbers, each firm produces an identical product, and there is freedom of entry and exit?

A. monopoly

B. oligopoly

C. only perfect competition

D. only monopolistic competition

E. both perfect competition and monopolistic competition

 

4. Which of the following is the best example of a perfectly competitive market?

A. farming

B. diamonds

C. athletic shoes

D. soft drinks

E. electricity distribution

1. When a profit-maximizing firm produces, they will be producing at that output at which marginal cost = marginal revenue:

  • all of the time
  • some of the time
  • on rare occasions
  • none of the time

2. Economics Profit is:

  • the same as accounting profit
  • sales minus explicit costs and implicit costs
  • sales minus variable costs and fixed costs
  • opportunity cost only

3. A market structure with so many firms that no one firm has any influence over price, and firms produce an identical product is called:

  • monopoly
  • oligopoly
  • perfect competition
  • monopolistic competition

4. Which of the following is NOT a characteristic of a perfectly competitive market?

  • identical products
  • perfect mobility
  • perfect knowledge
  • price maker

5. The demand curve in a perfectly competitive market is perfectly elastic.

  • true
  • false

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