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ECON 110 Chapter Notes - Chapter 11: Profit Maximization, Perfect Competition, Demand Curve

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pinkantelope920
2 Dec 2016
School
Queen's University
Department
Economics
Course
ECON 110
Professor
Ian Cromb

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Document Summary

Chapter 11: the structure of the canadian economy. Industries with many small firms: close to perfect competition or referred to as monopolistic competition. Industries with a few large firms: oligopolies or monopolies. Firms choose their products: most firms in imperfect competition sell differentiated products, that means that the products usually have slight differences however they are similar, firms have to decide how they are going to differentiate their product. Each firm produces its own version of the industry"s differentiated product therefore each firm faces a demand curve that is highly elastic because competing firms produce close substitutes: 2. All firms have access to the same technological knowledge and so have the same cost curves: 3. The industry contains so many firms that each one ignores the possible reactions of its competitors when it makes its own price and output decisions: 4.

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Related Questions

"Which is eviler? Apple, Facebook, or Google?" "The Myth of the Benign Monopoly," "Has Google become the new Microsoft?" "Google CEO talks of good, evil, and monopoly fears."
These are some of the headlines from various new sources regarding monopolies. If perfect competition is one end of the market structure spectrum as the most ideal form of market, monopoly holds the other end of the spectrum as the least ideal form of market. But why? why it is often deemed to be harmful to society, and what antitrust policies have been created to prevent firms from forming a monopoly or to break up already existing monopolies?

All market structures will be a "deviation" from perfection competition - meaning, we should compare these new structures back with perfection competition to try to understand why these are not as efficient as perfection competition where the purest form of free-market exists. However, is that when a monopoly engages in perfect price discrimination, it actually is just as efficient as perfect competition. Does that mean that a monopoly can indeed be as good for the economy as perfect competition can? If not, why not? What is the difference between the two cases?

1. A monopoly market structure is characterized by

a. large number of firms, standardized products, easy entry and exit.

b. large number of firms, differentiated products, easy entry and exit.

C. small number of firms, standardized or differentiated products, difficult entry.

d. one firm, a unique product without close substitutes, and impossible entry.

e. one firm, differentiated product, impossible entry.

 

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

a. Differentiated products

b. A downward-sloping demand curve for individual firms

c. Firms that are price makers

d. Impeded entry into the industry

e. A large number of firms

 

3. One factor that distinguishes oligopoly from other market structures is

a. the ease of entry into the market.

b. the interdependence of firms.

c. the slope of the demand curve.

d. the degree of product differentiation.

e. the amount of advertising expenditures.

 

The United States has a variety of regulations to address the economic harm resulting from monopoly power in an industry. This includes the Sherman Act of 1890, the Clayton Act of 1914, and the Federal Trade Commission Act of 1914. These acts were aimed at restricting the formation of cartels and monopolies to protect consumers and ensure competition. The article The Oligopoly Problem argued that oligopolies fall through the cracks of these regulations and leave consumers unprotected from harmful business practices where industries are highly concentrated. Read the article and respond to the following in your initial post: What are examples of firms in an oligopolistic market that abuse their power? Explain how they abuse their power and describe the impact on consumers. Do you agree with the author's feelings about increased government oversight of such industries? Why or why not?