Monopolistic Competition & Oligopoly

Finding profit/loss

(P-ATC)Q

The monopolistically competitive seller maximizes profit by producing at the point where:

C. marginal revenue equals marginal cost.

The study of how people (or firms) behave in strategic situations is called

game theory.

In the United States cartels are:

in violation of the antitrust laws.

Cartels are difficult to maintain in the long run because:

individual members may find it profitable to cheat on agreements.

The kinked-demand curve of an oligopolist is based on the assumption that:

competitors will follow a price cut but ignore a price increase.

Game theory:

is the analysis of how people (or firms) behave in strategic situations.

. Long-run equilibrium for a monopolistically competitive firm where economic profits are zero results from:

relatively easy entry.

Profits in the long run

In the long run purely competitive firms and monopolistically competitive firms earn zero economic profits, while pure monopolies may or may not earn economic profits.

When a monopolistically competitive firm is in long-run equilibrium

P = MC = ATC.

The term oligopoly indicates:

a few firms producing either a differentiated or a homogeneous product.

A breakdown in price leadership leading to successive rounds of price cuts is known as:

a price war

Nonprice competition refers to:

advertising, product promotion, and changes in the real or perceived characteristics of a product.

OPEC provides an example of:

an international cartel

Which of the following is the best example of oligopoly?

automobile manufacturing

Monopolistic competition resembles pure competition because:

barriers to entry are either weak or nonexistent.

Monopolistic competition is characterized by a:

large number of firms and low entry barriers.

Monopolistically competitive firms:

may realize either profits or losses in the short run, but realize only accounting profits in the long run.

The restaurant, legal assistance, and clothing industries are each illustrations of:

monopolistic competition.

Under monopolistic competition entry to the industry is:

more difficult than under pure competition but not nearly as difficult as under pure monopoly.

Which of the following is a unique feature of oligopoly?

mutual interdependence

In which of these continuums of degrees of competition (highest to lowest) is oligopoly properly placed?

pure competition, monopolistic competition, oligopoly, pure monopoly