ECN 121 Chapter Notes - Chapter 14: Strategic Dominance, Nash Equilibrium, Oligopoly

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olivedolphin875

4 Oct 2016

School

University of Portland

Department

Economics

Course

ECN 121

Professor

Hanig Ross

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Document Summary

Distinguish the difference between and oligopoly and an oligopolist. An oligopoly is an industry with only a small number of producers where as a producer in such an industry is known as an oligopolist. Explain what is means for an industry to be characterized by imperfect competition. It is when there is no monopoly but producers nonetheless realize that they can affect market prices. Explain what it means for sellers to collude. For a seller to collude it is because it is beneficial to them and together they raise their joint profit. Explain what a cartel is and how it can manipulate prices. A cartel is an agreement among several producers to obey output restrictions in order to increase their joint profits. As it concerns game theory, distinguish the difference between noncooperative and cooperative behavior. Noncooperative behavior is when a firm ignores the effects of their actions on each other"s profits.

Related Questions

1. True or false? Actions that allow oligopoly firms to coordinate their pricing behavior are called facilitating practices.

2. In the long run, if a perfectly competitive firm is incurring an economic loss, the firm

A. Will leave the industry

B. Is earning greater than normal profit but not an economic profit

C. Will minimize opportunity costs by staying in business

D. Will produce as long as total revenue exceeds the total fixed cost

E. Will have some long-run fixed costs

3. Which of the following is NOT one of the problems associated with common ownership of resources and a job that needed to be done?

A. Zimbody paid big body to do the antibody's job

B. Anybody could have done it, but nobody did it

C. Everybody was sure somebody would do it

D. Everybody blamed somebody

E. Nobody realized that everybody wouldn't do it

4. A negative externality related to a product

A. Results in an overallocation of resources to that product

B. Can be corrected by government subsidies

C. Is an example of government failure

D. Results in under allocation of resources to that product

E. Can be corrected by lowering the cost of production

5. A primary cause of inefficiency in government is that

A. Antitrust is applied to government policies as well as market situations

B. Government employees tend to be lazier than private-sector employees

C. The gains from government projects are often concentrated, while the costs are dispersed among all taxpayers

D. Markets interfere with governments

E. All of these are true

6. According to the survey reported in the text, most people believe that health-related goods and services should be allocated by the ___ allocation mechanism.

A. First come, first served

7. It is ___ that transfer(s) consumer surplus to producers and creates (s) deadweight losses.

A. The commodity market

B. Restrictions to entry

C. The allocation mechanism

D. Government

E. Perfect competition

8. The practice of legislators supporting one another's projects in order to ensure support for their own is called

9. When shopping in some countries, bargaining is standard. The sellers ask for a high price to start and then decrease the price until the sale is made. This is due to

A. Producers trying to gain as much consumer surplus as they can

B. Prices changing so quickly that it doesn't make sense to make price tags

C. No government control

D. The market unable to reach equilibrium

E. Consumers trying to gain as much consumer surplus as they can

10. All of the following are examples of a first-come, first-served system of allocation EXCEPT

A. Classes at school

B. Tickets to concerts

C. Medical care

D. Access to highways

E. All of these are examples allocated by a first-come, first-served system

periwinklelion416

Which statement is true?

The minimum point on the firm's marginal cost curve is the shutdown point.

The minimum point on the firm's average variable cost curve is the shutdown point.

The minimum point on the firm's average total cost curve is the shutdown point.

The minimum point on the firm's marginal cost curve is the break-even point.

As output expands beyond the break-even point, the vertical distance between the AVC and ATC will

remain constant.

get smaller.

get larger.

Total revenue divided by output equals

average variable cost.

marginal cost.

price.

average total cost.

A monopoly firm selling mustache wax to vain men in a small town is currently maximizing profits by charging a price of $5. It follows that the marginal cost of mustache wax

is equal to $5.

is greater than $5.

is less than $5.

None of these choices are true.

A firm can sell 14 units at $18, but to sell 15 units, the firm must cut the price to $17. The marginal revenue derived from selling the 15th unit is

-$18

$17

If total revenue is increasing as output is rising, then

marginal revenue must be greater than zero.

marginal revenue must be less than zero.

marginal revenue must be equal to zero.

price must be increasing.

Firms that had virtual monopolies, that is control over at least 80 percent of industry production, because of control over an essential resource include all of the following except

the DeBeers Diamond Company.

the Standard Oil Company.

the Ford Motor Company.

the International Nickel Company.

10.

Which statement is true?

None of these statements are true.

Most natural monopolies are government regulated or government owned.

All monopolies are bad.

All monopolies are good.

11.

Which is the most accurate statement?

There are virtually no oligopolies in the U.S.

The most important aspect of oligopoly is product differentiation.

There are a whole range of oligopolistic models, from a cartel to cutthroat competition.

An oligopolistic industry cannot have more than five firms

12.

Oligopolists have more control over prices than monopolistic competitors because

their prices are always set by the government.

since an oligopolist is the only competitor in the market, setting prices is no problem.

they can legally collude whereas monopolistic competitors may not.

with fewer competitors, they are able to monitor and determine their own prices much easier.

13.

The definition of monopolistic competition differs from that of perfect competition

in neither the number of firms nor the type of product.

in both the number of firms and the type of product.

with respect to the type of product.

with respect to the number of firms in the industry.

14.

The typical monopolistic competitor

may compete on the basis of physical differences, convenience, service, and ambience.

always competes on the basis of producing a product that is physically different from those of its competitors.

never uses price discrimination.

is a large firm.

15.

Which statement is true?

The monopolistic competitor may make a profit in the long run.

The monopolistic competitor has a perfectly elastic demand curve.

None of these statements are true.

The monopolistic competitor operates at the minimum point of her ATC curve.

16.

Which statement is true about the monopolistic competitor in the long run?

It will be breaking even.

It will be making a profit.

It may be making a profit or taking a loss.

It will be taking a loss.

17.

Which statement is true?

Most monopolistic competitors are large firms.

Monopolistic competitors produce goods or services for which there are no close substitutes.

None of these statements are true.

Monopolistic competitors usually operate at the minimum point of their average total cost curves.

18.

Which statement is false?

As the price of a good rises the consumer surplus decreases.

A person would maximize her total utility when she had no consumer surplus.

We will consume a service when its marginal utility is equal to its price.

A product's utility to a buyer is measured by how much the buyer is willing to pay for it.

In which of the following ways is a monopoly beneficial to an economy?

A. Monopoly profits give firms more reason to invest in the creation of new products through research and development.

B. Firms that are allowed monopoly profits search out innovative technologies that they can bring to market.

C. With natural monopolies, costs may be lower than those that would exist in competitive markets with many producers.

D. All of the above.

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

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

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

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

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

In the United States in 2011, there were 104 fatalities per 100,000 workers in the logging industry. This is the second-highest rate after the fisheries industry. Although the fatality rate in this industry is so high, many workers still choose to work as loggers.

What could explain this?

A. Workers choose these high-risk jobs because they are willing to bear an occupational risk to earn a higher wage.

B. Low-risk jobs are already taken, so workers must choose their next-best alternative, which in this case is logging.

C. Workers in these industries lack human capital and must choose to work as loggers.

D. Loggers must be indifferent between low-risk and high-risk jobs.

In the case of a decrease in product prices:

A. the quantity effect always dominates the price effect.

B. the price effect always dominates the quantity effect.

C. when the price effect dominates the quantity effect, total revenue decreases.

D. when the quantity effect dominates the price effect, total revenue decreases

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ECN 121 Chapter Notes - Chapter 14: Strategic Dominance, Nash Equilibrium, Oligopoly

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