ECON-1020 Chapter Notes - Chapter 9: Monopolistic Competition, Perfect Competition, Oligopoly

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mphyde

12 May 2022

School

Vanderbilt University

Department

Economics

Course

ECON-1020

Professor

Buckles Stephen

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Document Summary

In most cases, it is the number of competitors in the market which most significantly affects the amount of influence firms have over their prices. A competitive firm (one with many other firms producing identical goods) has no control over its price. This type of firm is actually very unusual. Other extreme is a market with only one firm (a monopoly) Has a good amount of influence over price. Barriers to entry: any impediment that makes it difficult or impossible for a new firm to enter and compete in a market. Ex: extremely high setup costs (like starting your own commercial airline) or legal barriers (can"t sell a good already patented by someone) Free entry : no serious impediment for a newcomer to start a business and compete. Oligopoly: markets w/ only a few competitors. Monopolistic competition: a market where there are many firms but each firm produces a differentiated product.

Related Questions

A major difference between monopolistic competition and perfect competition is:

a. there are barriers to entry in monopolistic competition. There are no barriers to entry in perfectly competitive markets.

b. monopolistically competitive firms sell differentiated products. Perfectly competitive firms sell identical products.

c. government regulation restricts the ability of monopolistically competitive firms to change their prices. Perfectly competitive firms face no price regulation.

d. the market demand curve in a monopolistically competitive market slopes downward. The market demand curve in a perfectly competitive market is horizontal

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1. Which of the following is a difference between a perfectly competitive market and a monopoly?

A. There are huge barriers to entry in a perfectly competitive market, while there are no barriers to entry in a monopoly.

B. The market demand curve faced by a perfectly competitive firm is horizontal, while the market demand curve in a monopoly is downward-sloping.

C. The sellers in a perfectly competitive market are price-makers, while a seller in a monopoly market is a price-taker.

D. The equilibrium price in a perfectly competitive market exceeds marginal revenue, while the equilibrium price in a monopoly equals marginal revenue.

2. Which of the following firms is likely to have the highest market power?

A. An oligopoly with homogeneous products

B. A monopoly

C. A monopolistic competitor

D. A perfectly competitive firm