eco 15

_______ competitive firms operate at smaller-than-efficient scale.

Monopolistically

_____ describes markets with only a few firms selling similar products.

Oligopoly

For all its similarities to a monopolist in the short run, the monopolistically competitive firm faces one huge problem that the monopolist does not. Which problem is this?

Other firms can enter the market.

______ is often intended to make us associate a particular image or emotion with that product.

Advertising

__________ can give high-quality firms a way to credibly signal the quality of their products because it costs money.

Advertising

According to the _________ effect, an additional unit of output sold at a price above _____ cost increases the firm's profit.

Blank 1: quantity Blank 2: marginal

If advertising persuades customers that products are more different than they truly are, it _____ consumers' willingness to ________ between similar products

Decreases switch

Monopolistically competitive firms make economic profits by engaging in price discrimination.

False

According to the price effect, the firm receives a lower price and therefore a lower profit for each unit it sells.

True

True or false: Advertised messages often have little or nothing to do with the product being advertised.

True

Assuming that production involves both fixed and marginal costs, the average total cost curve faced by monopolistically competitive firms is _____-shaped.

U

Assuming that production involves both fixed and marginal costs, monopolistically competitive firms face a

U-shaped average total cost curve.

In between perfect competition and monopoly lie two market structures characterized by

a small number of large firms with differentiated products.

_______ can convey useful information to consumers.

advertising

A Nash equilibrium occurs when

all players in a game have a dominant strategy.

In an oligopoly with two firms, regardless of what the other firm does, each firm has

an incentive to renege on the deal and compete.

A duopoly is

an oligopoly with two firms

Other firms have an incentive to enter the market when existing firms

are making positive economic profits.

Because firms know more about the true quality of their products than consumers do, there is. __________ information in monopolistically competitive markets.

asymmetric

The act of working together to make decisions about price and quantity is .

collusion

More firms making more products that are similar to the original product means that

consumers have a wider range of substitutes.

Because the market outcomes in a competitive oligopoly are between those of a monopoly and a perfectly competitive market ______ loss still exists, but it is _____ than when there is collusion.

deadweight lower

The optimal production point for a monopolistically competitive firm in the long-run market equilibrium will always be on the

decreasing section of the ATC curve.

Monopolistically competitive firms face a downward-sloping _____ curve

demand

When there are more product options from which consumers can choose, the

demand curve faced by the firm shifts to the left.

A duopoly will tend to

drive prices and profits down below the monopoly level.

When there are only two firms competing in a market it is called a(n)

duopoly

Product differentiation enables monopolistically competitive firms to keep making ________ profits in the ____ run

economic short

As long as firms currently in the market are earning _________ As long as firms currently in the market are earning _____

economic zero

For all its similarities to a monopolist in the short run, the monopolistically competitive firm faces one huge problem that the monopolist does not: Other firms can ________ the market.

enter

As long as firms currently in the market are earning negative profits, firms will ____ the market until existing firms are no longer earning negative profits.

exit

Because advertising costs money, it can give

high-quality firms a way to credibly signal the quality of their products

Monopolistic competition is inefficient because firms maximize profits at a price that is

higher than marginal cost.

Firms in a monopolistically competitive market face the same situation as firms in a perfectly competitive market in that profits are driven to zero

in the short run.

In oligopoly, when the quantity effect outweighs the price effect, a(n) ________

increase quantity

Firms have an incentive to persuade customers that their products cannot easily be substituted with a rival product because product differentiation enables monopolistically competitive firms to

keep making economic profits in the short run.

The optimal production point for a monopolistically competitive firm in the _______ run market equilibrium will be where the ATC curve touches the _ curve

long demand

In perfectly competitive markets,

marginal revenue equals price.

In monopoly markets,

marginal revenue is less than price.

Imperfect competition includes the market structures of

monopolistic competition and oligopoly.

Two defining features of the two market structures that lie between the extreme models of _____ and perfect competition are a small number of large firms and product variety

monopoly

Because the market outcomes in a competitive oligopoly are between those of a ________________, deadweight loss still exists, but it is lower than when there is collusion.

monopoly and a perfectly competitive market

In oligopoly, the price effect is smaller when there are ________ firms.

more

When all players in a game have a dominant strategy, the result is called a _____ equilibrium

nash

Firms will have an incentive to exit the market when they are earning ________ profits. This process will continue until all firms are earning _________ profit

negative zero

A market with only a few firms that sell similar products describes

oligopoly

In a dominant strategy,

one strategy is always the best choice for a player, regardless of what other players do.

Oligopoly and monopolistic competition are examples of market structures that are _____ competitive

perfectly

One effect of advertising is to _______ customers that products are more different than they truly are.

persuade

One effect of advertising is to __________ customers that products are more different than they truly are.

persuade

Monopolistically competitive firms make economic profits by

persuading buyers that their product is different from the products of their competitors.

As long as firms currently in the market are earning ________ profits, firms will enter the market with products that are very close substitutes until existing firms are earning an economic profit of __________

positive 0

An oligopolist will continue to increase output up to the quantity at which the _____ quantity effect of an additional unit on profits is exactly equal to the _____ price effect.

positive; negative

A monopolistically competitive firm cannot adjust its ____ A monopolistically competitive firm cannot adjust its __ consumers demand.

price quantity

Other firms have an incentive to enter the market when existing firms are making economic ________ .

profit

In the long run, firms in a monopolistically competitive market face the same situation as firms in a perfectly competitive market in that

profits are driven to zero.

In oligopoly when the ______ effect outweighs the _____ effect, profit-maximizing firms will increase their output.

quantity price

Monopolistic competition is inefficient because

some mutually beneficial trades do not occur.

In oligopoly,

the price effect is smaller when there are more firms.

Monopolistic competition is inefficient because

there is deadweight loss.

Zero profit means that

total revenue is exactly equal to total cost.

Monopolistic competition is inefficient because the market does not maximize

total surplus.

The act of working together to make decisions about _____ and ____ is collusion.

worse

___________ profit means that total revenue is exactly equal to total cost.

zero