CH 9 Smart Books
Oligopolistic behavior implies that oligopolists prefer competition
through product development; through advertising
Advertising increases efficiency by
- lowering search costs for consumers - facilitating the introduction of new products
Which of the following best exemplifies a firm with excess capacity?
A fast food- restaurant where customers never have to wait to place an order
In the long run, a monopolistic competition fails to achieve which of the following?
Allocative efficiency, Productive efficiency
The benefit to oligopolist from collusions are:
It reduces price uncertainty; it possibly prohibits the entry of new rivals, it increases profit
What will happen to a monopolistically competitive firm in the long run?
It will only break even
Which of the following is true about the oligopolist if rivals match a price cut but ignore a price increase?
Its marginal revenue curve would consist of two segments
___ competition is a market characterized by having many sellers, differentiated products, and ease of entry and exit from an industry
Monopolistic
The benefits to oligopolists from collusion are:
a) It reduces price uncertainty c) It increases profits d) It possibly prohibits the entry of new rivals
Allocative efficiency is achieved in the short run when the equality of which of the following occurs?
P=MC
A type of implicit understanding used by oligopolists to coordinate prices without engaging in outright collusion is known as ___ ___.
Price Leadership
Which of the following is a model used to examine oligopolistic pricing?
The kinked-demand curve model
Oligopolies are comprised of ___.
a few large producers
Entry of new firms into monopolistically competitive industries is relative easy because
capital requirements are low
when firms in an oligopoly ___, their payoffs will be greater than if they did not.
collude
___ means illegal cooperation with rivals
collusion
The models used to study pricing and output by oligopolies are
collusive pricing model; price leadership model; the kinked-demand curve model
barriers to entry exist for monopolies as well as oligopolies in the form of all the following except
diseconomies of scale
The demand curve for a monopolistically competitive firm is
downward-sloping
It is reasonable to assume that the demand of a non-colluding oligopolist facing kinked demand curves is less ___ or even ___ below the going price.
elastic; inelastic
when plant and equipment are underused because firms are producing less than minimum ATC output, this is known as having
excess capacity ; productive inefficient
Firms often merge, forming oligopolies, in order to
gain greater control over market supply; become a large buyer of inputs, increase control over price
the study of how people behave in strategic situations is called ___ ___.
game theory
A monopolistically competitive firm's demand curve is
high but not perfectly elastic
Price leader make price adjustments:
infrequently, due to the uncertainty in rivals' response to these price changes; by communicating impending price adjustments to the industry; by establishing a price that discourages new entrant into the industry
In the short run, monopolistically competitive firm maximize profits or minimize losses by producing the output level where
marginal revenue equals marginal cost
Two types of market models that closely approximate many markets in the real world are
monopolistic competition and oligopoly
___ competition is competition illustrated through product differentiation and advertising
nonprice
A(n) ___ is a market dominated by a dew large producers of a homogenous or differentiated product
oligopoly
Monopolistic competitive firms do not achieve allocative efficiency because the ___.
price for a monopolistic competitive firm exceeds the marginal cost
Oligopolist often compete through product development and advertising indeed of price because
product development and advertising are relatively difficult to copy
Firms in monopolistic competition produce goods with___.
slightly varying physical characteristics; varying degree of customer service
Monopolistic competition normally consisted of 25 to 75 firms rather than hundreds of thousands and involves which of the following characteristics?
small market shares; no collusion; independent action
which of the following is not an example of product differentiation?
some stores may charge different prices
Firms in oligopolistic industries are "price makers" because
they are few in number
