Chapter 17 & 18

A firm faces a small number of competitors. This firm is competing in

an oligopoly.

Nike is a firm in monopolistic competition. If Nike is making an economic profit from new cross-training shoe, over time the demand for these shoes

decreases as new firms enter the market.

The focus of antitrust legislation is to

maintain competition.

A firm in monopolistic competition

might be selling a brand name product.

An industry with a large number of firms, differentiated products, and free entry and exit is called

monopolistic competition.

The first antitrust law in the United States was the

Sherman Act, passed in 1890.

A cartel is

a group of firms acting together to raise price, decrease output, and increase economic profit.

What does monopolistic competition have in common with perfect competition?

a large number of firms and freedom of entry and exit

The major dilemma facing Boeing and Airbus is the

fact that if each firm separately tries to maximize its profit, it might wind up with less profit than otherwise.

"Duopoly" is

a two-firm oligopoly.

A differentiated product has

close but not perfect substitutes.

Firms in monopolistic competition have demand curves that are

downward sloping.

All games have which features?

rules, strategies, and payoffs

When firms in an oligopoly successfully collude and do not cheat on a cartel agreement, they can make a long-run economic profit similar to

monopoly.

For a firm in monopolistic competition, innovation and product development are

necessary in order to have a chance of making at least a short-run economic profit.

The major difference between monopolistic competition and monopoly is

only a monopoly can make an economic profit in the long run.

In the example of the Nike running shoe, we see that

selling costs account for over half of a shoe's retail price.

One reason a company advertises is to

signal consumers that its product is high quality.

If firms in an oligopolistic industry consistently cut their price to sell more output, what price and output will result?

the competitive price and output

Economists use game theory to analyze strategic behavior, which takes into account

the expected behavior of others and the recognition of mutual interdependence.