ECON 2005 Lecture Notes - Lecture 11: Imperfect Competition, Demand Curve, Marginal Revenue

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beigecoyote97

31 Jan 2019

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Occurs when resources are misallocated or inefficiently allocated. Single firms have some control over price and competition. A single industry controls a product with few substitutes and barriers to entry to the industry. Buyers/sellers do not have all information necessary about product. Goods that are for collective benefits on members on society. A cost or benefit from a transaction not explicitly involved in the transaction. A firm"s ability to raise price without losing all demand for its product. Economies of scale or other cost advantages. Get to decide how much to produce and how, and how much to charge. Firm"s demand curve followers market demand curve. Want to choose the quantity where mr = mc. Will determine the correct quantity for mr, then choose the price. No incentive to operate the most efficient way possible. Waste resources trying to limit the ability of other firms to enter the industry.

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

The pharmaceutical industry operates in an oligopoly. There are a limited number of firms in the industry. This is due primarily to the high fixed cost of entering the market, the high cost of research and development, obtaining patents, and dealing with mergers and acquisitions. Let us assume that over 70% of the products sold in this market are protected by patents for the next eight years.

Identify and describe the market characteristics of oligopoly.
Explain price competition in oligopoly.
Explain the barriers to entry in monopoly and oligopoly.
Does this pharmaceutical industry conform to an economist's definition of an oligopoly? Justify your response.

plumox822

1. if the government attempts to break up a natural monopoly to enforce competition in an industry

A. the average cost of producing the good will increase

B. the smallest firm will have a significant cost advantage over the larger, less efficient firms

C. the average cost of producing the good will decrease

D. the price paid by consumers will be expected to remain the same.

2. which statement is true?

A. the monopolistic competitor always makes a profit in the short run

B. the monopolistic competitor operates at peak efficiency

C. product differentiation takes place in the minds of the buyers

D. none of these statements is true

3. Price discrimination

A. occurs when a good or service is resold

B. is prohibited by law

C. occurs when a seller charges two or more prices for the same good or service

D. occurs when the seller charges different prices for different quality products

4. Monopolistic competition may lead to each of the following except

A. inefficiency

B. overdifferentiation

C. overcapacity

D. monopoly profits

5. In the long run in monopolistic competition

A. most firms are making a profit

B. the absence of entry barriers ensures that there are no profits

C. economies of scale ensure that there are no profits

D. most firms are losing money

6. Price discrimination means

A. charging different prices for identical goods that have identical production costs

B. paying wages according to race or sex rather than productivity

C. exploiting the working masses by charging the highest single price possible.

D. eliminating all costs so that only pure profits are realized

7. The definition of monopolistic competition includes

A. few firms and ease of entry and exit

B. few firms and barrieres to entry and exit

C. many firms and barriers to entry and exit

D. many firms and ease of entry and exit

8. Which statement is true?

A. there are many firms in a monopolistically competitive industry.

B. monopolistic competitors produce an identical product

C. in order for product differentiation to take place, there must be clear physical differences amont the products sold

D. none is true

9. Long-run equilibrium for firms in monopolistically competitive industries is similar to that for firms in perfect competition in that

A. price equals minimum possible average total cost

B. price equals marginal cost

C. marginal revenue equals average total cost

D. price equals average total cost

10. Which statement is false?

A. Oligopolies are illegal in most states

B. most oligopolies engage in outright collusion

C. Ford motor company is an oligopoly

D. none of these statements is false

ECON 2005 Lecture Notes - Lecture 11: Imperfect Competition, Demand Curve, Marginal Revenue

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