final chapters 11 and 16

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example of oligopoly

automobile manufacturing

joe complains that 32% of his income last year went to taxes. he is referring to his

average tax rate

the monopolistic competition model assumes that

firms will engage in nonprice competition

the study of how people or firms behave in strategic situations is called

game theory

which of the following taxes is most likely to be regressive?

general sales taxes

which of the following taxes is least likely to be shifted

a personal income tax

in long-run equilibrium monopolistic competition entails

an under-allocation of resources due to excess capacity

if the four-firm concentration ratio for industry X is 80

the four largest firms account for 80 percent of total sales

the term oligopoly indicates

a few firms producing either a differentiated or homogenous product

When a monopolistically competitive firm is in long-run equilibrium

MR=MC and P> minimum ATC

which of the following is an exhaustive government outlay?

a NASA payment to Boeing Corporation for space hardware.

the mutual interdependence that characterizes oligopoly arises because

a small number of firms produce a large proportion of industry output

the progressive structure of the income-tax system is based on the

ability to pay principle

in the long run, a profit-maximizing monopolistically competitive firm sets its price

above marginal cost

in the short run, a profit-maximizing monopolistically competitive firm sets its price

above marginal cost

nonprice competition refers to

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

excess capacity refers to the

amount by which actual production falls short of the minimum ATC output.

OPEC provides an example of

an international cartel

in short sun equilibrium, the monopolistically competitive firm shown will set its price

below ATC

game theory can be used to demonstrate that oligopolists

can increase their profits through collusion.

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

competitors will follow a price cut but ignore a price increase

the likelihood of a cartel being successful is greater when

cost and demand curves of various participants are very similar

suppose an oligopolistic producer assumes its rivals will ignore a price increase but match a price cut. in this case the firm perceived its

demand curve as kinked, being steeper below the going price than above

government purchases and transfer payments

differ because the former absorb resources while the latter do not.

the price elasticity of a monopolistically competitive firm's demand curve varies

directly with the number of competitors, but inversely with the degree of product differentiation

if the demand for a product is perfectly inelastic, the incidence of an excise tax will be

entirely on the buyer

a monopolistically competitive firm has a

highly elastic demand curve

in the US cartels are

in violation of the antitrust laws.

an industry having a four-firm concentration ratio of 85 percent

is an oligopoly

the larger the number of firms and the smaller the degree of product differentiation the

more elastic is the monopolistically competitive firm's demand curve

the demand curve of a monopolistically competitive producer is

more elastic than that of a pure monopolist, but less elastic than that of a pure competitor.

unique feature of oligopoly

mutual interdependence

in long-run equilibrium a monopolistically competitive producer achieves

neither productive efficiency nor allocative efficiency

oligopoly is more difficult to analyze than other market models because

of mutual interdependence and the fact that oligopoly outcomes are less certain than in other market models.

economic analysis of a monopolistically competitive industry is more complicated than that of pure competition because

of product differentiation and consequent product promotion activities

game theory is best suited to analyze the pricing behavior of

oligopolists

the largest category of Federal spending is for

pensions and income security

concentration ratios measure the

percentage of total industry sales accounted for by the largest firms in the industry number of firms in an industry

the largest source of tax revenue for the U.S. Federal government is

personal income taxes

a monopolistically competitive indutry combines elements of both competition and monopoly. the monopoly element results from

product differentiation

with respect to local finance

property taxes are the basic source of revenue and education is the major type of expenditure

which of the following is not a basic characteristic of monopolistic competition?

recognized mutual interdependence

with respect to state finance, for most states

sales and excise taxes are the major source of revenue and education is the major type of expenditure.

(last word) which of the following statements about taxes and government spending is correct?

the overall system of taxes and spending is progressive, as over $1 trillion per year gets transferred from upper income households to lower and middle income households.

taxable income is

total income less deductions and expemptions

in the long run, the price charged by the monopolistically competitive firm attempting to maximize profits

will be equal to ATC


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