final chapters 11 and 16
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