Adaptive Learning Assignment-Monopolistic Competition and Oligopoly

Referring to the graph, what is the profit maximizing price? $95 $100 $140 $88

$140 Reason: To find the profit-maximizing price, find where MR=MC, then read up to the demand curve to find the price.

Which of the following describes collusion?

A situation in which decision makers coordinate their actions to achieve a desired outcome.

In the presence _____ of profits, firms enter a monopolistically competitive market until the market reaches the point at which the firms are generating a(n) _____ profit; then entry stops and the market settles into its _____ -run equilibrium.

Blank 1: economic Blank 2: normal Blank 3: long

Which of the following markets could be considered monopolistically competitive? (Choose all that apply.) Hotels Fast food Clothing Air travel Cable TV

Clothing Hotels Fast food

Allocative efficiency occurs when:

MB = MC.

A market structure characterized by a relatively large number of sellers producing a differentiated product - for which they have some control over the price they charge - in a market with relatively easy market entry and exit is known as _____ competition.

Monopolistic

Which of the following is not a characteristic of monopolistic competition? The products are standardized. Firms have some control over price. There is a relatively large number of buyers and sellers. Entry and exit is relatively easy.

The products are standardized.

In monopolistic competition, once you find the profit-maximizing quantity, how do you find the profit-maximizing price?

You read the corresponding price from the demand curve.

An outcome in which, unless the players can collude, neither player has an incentive to change his or her strategy is:

a Nash equilibrium.

A situation in which a particular strategy yields the highest payoff, regardless of the other player's strategy, is:

a dominant strategy.

A number of entry _____ are present in oligopolistic markets.

barriers

A group of competing companies that aim to maximize joint profits by coordinating their policies to fix prices, manipulate output, or restrict competition is called a(n)_____

cartel

A situation in which decision makers coordinate their actions to achieve a desired outcome is called _____.

collusion

Monopolistically competitive markets:

combine characteristics of competitive markets and pure monopolies.

The difference between the economic surplus when the market is at its competitive equilibrium and the economic surplus when the market is not in equilibrium is the:

deadweight loss.

Game theory is the study of the _____ behavior of decision makers.

strategic

When monopolistically competitive firms follow the marginal revenue and the marginal cost rule, the result can be _____ profits, _____ profits, or even losses, depending on market conditions.

economic; normal

Monopolistic competition and perfect competition have one main characteristic in common: relatively easy market _____ and _____

entry; exit.

The level of profit that occurs when the total revenue is _____ to the total cost is known as normal profit.

equal

The mutual interdependence observed among oligopolistic firms is often studied using the tools of _____ theory.

game

The presence of many monopolistically competitive firms in an industry makes the firm unable to produce enough output to reach the ____ average total cost, so the firms have_____ capacity to produce.

minimum, excess

The long-run equilibrium in a monopolistically competitive market results in firms realizing _____ profits, which removes all incentives for firms to enter or exit the industry.

normal

Producers operating in oligopolistic markets generate:

normal profits and even losses in the short run.

Referring to the graph, Sandra's Sweets is a monopolistically competitive firm that produces 120 cakes. This level of production is:

not productively or allocatively efficient.

The behavior followed by _____ firms needs to be strategic, given that they face other competitors in their markets.

oligopolistic

A clear benefit to monopolistic competition for consumers is product

variety

Which of the following markets would most closely resemble monopolistic competition? Oil Utilities Wheat Wine

wine

Referring to the graph, the profit or loss amount for Sandra's Sweets at the profit maximizing output and price is $

-1280

Using the table, which shows a monopolistically competitive firm's demand schedule, marginal revenue, and marginal cost to answer the following question. The profit maximizing price for this firm is $_____.

7

A payoff ____ is a table showing the potential outcomes arising from the choices made by decision makers.

matrix

What is one way that monopolistic competition is similar to a monopoly? Both have a differentiated product. Both have a large number of sellers. Both have one seller. Both have some control over prices.

Both have some control over prices.

In order for a monopolistically competitive firm to produce at a point that is both productively and allocatively efficient, which of the following has to be true about the profit-maximizing quantity?

Demand = Marginal Cost = ATC

What would happen to a firm's demand in a monopolistically competitive market if there was less competition in the market?

Demand would become more inelastic

What would happen to a firm's demand in a monopolistically competitive market if there was an increase in the number of consumers?

Demand would increase.

Because the products of monopolistically competitive firms are _____ from other companies in their industry, the _____ curve they face is downward sloping.

Differentiated; demand

What is true about firms in monopolistic competition in the short-run?

Monopolistically competitive firms can generate an economic profit, a normal profit, or an economic loss.

Use the graph of a monopolistically competitive firm above to answer the following question. What is the amount of profit or less Monica will make at the profit maximizing price and quantity?

Profit of $2000 Reason: The price here is $160, and the quantity is 40. At this quantity, the ATC is $110. The profit per unit is equal to the price minus the ATC, or $50. The entire profit is ($50)(40) = $2,000). Profit = (P −ATC)*q = (160 − 110)*40 = $2,000

Profit maximization implies that monopolistically competitive firms should expand production up to the point where the marginal revenue equals the marginal cost. (True or False)

True

Which of the following is not an entry barrier in oligopolistic markets?

Upward-sloping long run marginal cost curve

The strategy of distinguishing one firm's product from the competing products of other firms is called product _____

differentiation

The total revenue minus the implicit and explicit costs of production is _____ profit.

economic

Compared to perfect competition, a benefit of monopolistic competition for consumers is:

increased product variety.

Because _____ competitive firms have some control over prices, the firm will charge consumers the price they are willing and able to pay for the available output, which is found by projecting the profit-maximizing output level onto the _____ curve.

monopolistically; demand

Deadweight loss represents the amount of consumer surplus and producer surplus forgone because the monopolistically competitive firm charges a price _____ than the marginal cost.

more

The demand for a monopolistically competitive firm is _____ elastic than the demand faced by a pure monopoly because of the availability of close substitutes.

more

____ interdependence is a situation in which the strategy followed by one producer will likely affect the profits and behavior of another producer.

mutual

A(n) ____ equilibrium is an outcome in which, unless the players can collude, neither player has an incentive to change his or her strategy.

nash

As in a monopoly, in a(n) _____ , the industry has extensive entry barriers.

oligopoly

In a(n) _____ , producers are price makers and behave strategically when making decisions related to the features, prices, and advertising of their products.

oligopoly

When there is production efficiency,: output is produced at the lowest possible total cost per unit of production. output is produced using the fewest resources possible to produce a good or a service. output is produced in such a way that the marginal benefit equals the marginal cost. output is produced in such a way that the opportunity cost is zero.

output is produced at the lowest possible total cost per unit of production. output is produced using the fewest resources possible to produce a good or a service.

A(n) _____ dilemma is a term used to describe a situation in which the Nash equilibrium is not the outcome that maximizes the payoffs to both players.

prisoner's

In an oligopoly,:

producers may or may not earn economic profits.

The strategy of distinguishing one firm's product from the competing products of other firms is called _____ differentiation.

product

Producing output at the lowest possible total cost of production per unit is _____ efficiency.

productive

(P - ATC) x Q equals:

profit

A monopolistically competitive firm should produce output until the marginal _____ equals the marginal _____.

revenue; cost

Given that oligopolistic firms face other competitors in their markets, their behavior must definitely be:

strategic.

____ efficiency is producing the goods and services that consumers most want in such a way that the marginal benefit equals the marginal cost.

allocative

Laws designed to prevent firms from engaging in behaviors that would lessen competition in a market are called:

antitrust laws

In a monopolistically competitive market - each firm produces a differentiated and unique product - so firms face _____ -sloping demand curves.

down