monopolistic/olgopolies
The underutilization of resources that occurs when the quantity of output a firm chooses to produce is less than the quantity that minimizes the average total cost is called _________
excess capacity
in an ______ , there are a few large producers.
oligopoly
in an ________ producers are price makers and behave strategically when making decisions related to the features, prices, and advertising of their products.
oligopoly
A firm operating under the kinked demand model is most likely operating in a(n)
oligopoly.
Which of the following is not an entry barrier in oligopolistic markets?
Upward-sloping long run marginal cost curve
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.
Less aggressive competition is most likely to occur when
a game is played repeatedly.
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)
t
first mover advantage
the advantage that a player receives by moving first in a sequential game and thereby influencing the set of possible outcomes
Referring to the graph, the profit or loss amount for Sandra's Sweets at the profit maximizing output and price is $
-1280
Referring to the graph, what is the profit maximizing price?
140
Use the table of market data to find the Hirschman Index.
1824
The top four firms in the retail surfboard industry maintain total sales of $3 million per year. If the entire retail surfboard industry sells $12 million worth of output, then the four-firm concentration ratio is ______ %
25
Which situation depicts the practice of price leadership in a noncollusive oligopolistic market?
A popular local restaurant announces price increases and other restaurants in the city follow by increasing their prices.
Which of the following describes collusion?
A situation in which decision makers coordinate their actions to achieve a desired outcome.
sherman act (1890)
the first antitrust law enacted in the united states which made "every contract, combination, or conspiracy in restraint of trade" illegal
The percentage of total market sales accruing to one specific firm is called:
the market share.
Price leadership refers to
the practice of the dominant firm signaling price changes.
backward induction
the process of identifying optimal strategies by starting at the end of a game tree and moving towards its origin
game theory
the study of the strategic behavior of decision makers
Deadweight loss refers to:
the value of the economic surplus that is forgone when a market is not allowed to adjust to its competitive equilibrium.
Producing output at the lowest possible total cost per unit of production is:
productive efficiency.
What is one way that monopolistic competition is similar to a monopoly?
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
The demand for a monopolistically competitive firm is more _____ than the demand faced by a pure monopoly because of the availability of close substitutes.
elastic
Economic profit creates an incentive for other monopolistically competitive firms to ____ the market
enter
The level of profit that occurs when the total revenue is ______ to the total cost is known as normal profit.
equal
When profit exceeds zero, the firm is:
generating an economic profit.
What is the name of the model where firms operating in an oligopolistic market match only price decreases of other firms in the industry?
kinked demand model
antitrust laws
laws designed to prevent firms from engaging in behaviors that would lessen competition in a market
The monopolistically competitive firm produces ________ output than would be productively efficient
less
______ interdependence is a situation in which the strategy followed by one producer will likely affect the profits and behavior of another producer.
mutual
(P - ATC) x Q equals
profit
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 20000
(π /Q) = P - ATC tells us
profit per unit
Given that oligopolistic firms face other competitors in their markets, their behavior must definitely be:
strategic
The top four firms in the retail surfboard industry maintain total sales of $6 million per year. If the entire retail surfboard industry sells $12 million worth of output, then the four-firm concentration ratio is
50%
In a monopolistically competitive market - each firm produces a ___________ product - so firms face downward-sloping demand curves.
differentiated
The strategy of distinguishing one firm's product from the competing products of other firms is called product
differentiation
a _______ strategy is a situation in which a particular strategy yields the highest payoff - regardless of the other player's strategy.
dominant
Allocative efficiency occurs when:
MB = MC.
Suppose Carl's Candies sells 100 boxes of candy for $5 each. The total fixed cost of the 100 boxes is $100 - and the average variable cost of the 100 boxes is $1.50 per box. Carl's makes a total profit of:
$250.
Indicate the two most common numerical indicators of market concentration.
(CR4)) (HHi)
Which of the following characteristics of monopolistic competition helps to best explain why consumers can usually find exactly what they are looking for based on their preferences and budgets?
A differentiated product
Referring to the payoff matrix, suppose two firms, Firm A and Firm B, in an oligopoly want to compete based on pricing. What is Firm A's dominant strategy?
Low price
If Pharm Corp chooses low spending on research, what is New Pill's best option?
New Pill will spend high and earn $20 million.
Referring to the graph provided, what is the profit maximizing price and quantity?
The profit maximizing quantity is QA and the price is PA.
Which of the following aspects of oligopolistic firms does game theory help us study?
Their strategic behaviour
repeated game
a situation in which a game is played a (potentially infinite) number of times, with the players choosing a strategy each time
dominant strategy
a situation in which a particular strategy yields the highest payoff for a decision maker regardless of the other decision makers strategy
payoff matrix
a table showing the potential outcomes arising from the choices made by decision makers
Producing the goods and services that consumers most want in such a way that the marginal benefit equals the marginal cost is:
allocative efficiency.
Clayton act
an antitrust law that prohibits mergers that would substantially lessen competition or create a monopoly, as well as some specific business practices such as tying contracts
federal trade commission act (1914)
an antitrust made "unfair methods of competition" and "unfair or deceptive acts or practices" illegal
nash equilibrium
an outcome in which decision makers choose their dominant strategy and each has no incentive to independently change his or her strategy
Monopolistic competition and perfect competition have one main characteristic in common: relatively ______ market entry and exit
easy
Impediments that prevent firms from entering a market or an industry are known as:
barriers to entry
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.
Which of the following markets could be considered monopolistically competitive?
clothing hotels fast food
When firms, individuals, or any group of economic actors engage in ______ , they coordinate their actions to achieve a desired outcome.
collusion
Monopolistically competitive markets:
combine characteristics of competitive markets and pure monopolies.
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 monopolistic
competition
If other firms in an industry decrease price, and a firm is operating under the kinked demand curve model, the firm will respond by
decreasing its price.
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
economic normal long
The profit maximization rule states that a firm should produce a level of output where the marginal revenue ________ the marginal cost
equals
nash _______ is an outcome in which, unless the players can collude, neither player has an incentive to change his or her strategy.
equilibrium
In the presence of economic losses, firms ______ a monopolistically competitive market until the market reaches the point at which the firms are generating a(n) _______ profit; then exit stops, and the market settles into its long-run equilibrium.
exit normal
When a player moves first in a sequential game, thereby influencing the set of possible outcomes they experience the
first-mover advantage.
A concentration ratio that measures the percentage of sales by the four largest firms in a particular industry is called the:
four-firm concentration ratio.
A dominant firm in a noncollusive oligopolistic market may signal for other firms to reduce prices in order to
limit entry of new firms.
The level of profit that occurs when the total revenue is less than the total cost is known as a(n)
loss
Cellular, Inc., the dominant firm in the cell service industry, has announced that it will be reducing prices due to new technology that delivers its services at a lower cost. It is likely other firms will respond by
lowering their prices.
If other firms in an industry increase price, and a firm is operating under the kinked demand curve model, the firm will respond by
maintaining its existing price.
In game theory, a repeated game is played
many, sometimes an infinite number, times.
To maximize profits, a cartel should produce a level of output where the:
marginal revenue equals the marginal cost.
The percentage of total market sales accruing to one specific firm is called the
market share
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
as in a monopoly in a ______ the industry has extensive entry barriers
oligopoly
Monopolistically competitive firms are unable to produce enough output to reach the minimum average total cost because of the:
presence of other monopolistically competitive firms in the industry.
Oligopolistic firms can influence the prices they charge for their products, but their behavior needs to be ______ given that they face other competitors in their industries.
strategic
profit equals ______ revenue minus ____ cost
total x2
A clear benefit to monopolistic competition for consumers is product ______
variety
For a firm operating under the kinked demand model, the profit maximizing quantity occurs
where marginal revenue equals marginal cost and the price is determined by demand.
Which of the following markets would most closely resemble monopolistic competition?
wine
Use the table of market data to find the Hirschman Index.
3350
because ______ competitive firms face a downward-sloping demand curve, their marginal revenue curve lies _____ the demand curve.
monopolistic beneath
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
monopolistiv demand
A market structure characterized by a single seller is a(n) _______
monopoly
A person who invents the ability to time travel will likely operate as a(n) ________ because there would be no substitutes and entering that market would be difficult for anyone else
monopoly
The Herfindahl-Hirschman Index HHI is expressed as a number between 0 and 10,000, where 10,000 represent a pure ________
monopoly
In a monopolistically competitive market, competitors make close substitutes, so demand curves are relatively ______ elastic than those faced by monopolies and ___________ elastic than those faced by perfectly competitive firms.
more less
The kinked demand model occurs when:
noncollusive oligopolistic firms ignore other firms' price increases, but match their price decreases.
The kinked demand model is most common among firms in a(n)
noncollusive oligopoly.
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
Used in noncollusive oligopolistic markets, the practice of a dominant firm to signal upcoming price changes to other firms in the industry is known as
price leadership.
a ______ 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.
prisoners
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.
When profit equals zero, the firm is:
generating normal profits.
Deadweight loss represents the amount of consumer surplus and producer surplus forgone because the monopolistically competitive firm charges a price _________ than the marginal cost
higher
Compared to perfect competition, a benefit of monopolistic competition for consumers is:
increased product variety.
The Market, the dominant grocery store in a small city, has announced it will be increasing prices to adjust for higher utility costs. It is likely other firms will respond by
increasing their prices.
Compared to a one period game, repeated games are more likely to result in
less aggressive competition.
The strategy of distinguishing one firm's product from the competing products of other firms is called _______ differentiation
product
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.
game tree
a mapping tool that shows the strategies available to players engaged in a sequential game as well as the potential outcomes received by those players
in an ________ competitive market, consumers can usually find exactly what they are looking for based on their preferences and budgets.
monopolistic
