Module 11

monopolistic competition

a market structure in which many companies sell products that are similar but not identical

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

a price war

A monopolistically competitive industry combines elements of both competition and monopoly. It is correct to say that the competitive element results from:

a relatively large number of firms and the monopolistic element from product differentiation.

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

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.

Secret conspiracies to fix prices are examples of:

covert collusion

The less elastic a monopolistic competitor's long-run demand curve, the:

greater its excess capacity.

A monopolistically competitive firm has a:

highly elastic demand curve

Suppose firms in a collusive oligopoly decide to establish their prices at a level that discourages new rivals from entering the industry. This is called:

limit pricing.

Monopolistic competition means:

many firms producing differentiated products.

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.

We would expect a cartel to achieve:

neither allocative efficiency nor productive efficiency.

monopolistic and oliogopolistic competition

neither allocative or productively efficient

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.

Three sellers of Native American arts and crafts having an informal agreement of charging similar prices best illustrates the idea of:

price leadership

monopolistic and oliogopolistic competition

productive efficient if P=ATC allocative efficient if P=MC

In an oligopolistic market:

products may be standardized or differentiated.

Suppose an oligopolistic producer assumes its rivals will ignore a price increase but match a price cut. In this case the firm perceives its:

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

The copper, aluminum, cement, and industrial alcohol industries are examples of:

homogeneous oligopoly.

Aluminum competes with copper in the market for power transmission lines. This illustrates:

interindustry competition.

An industry having a four-firm concentration ratio of 85 percent:

is an oligopoly.

Monopolistic competition is characterized by a:

large number of firms and low entry barriers.

The monopolistically competitive seller's demand curve will become more elastic the:

larger the number of competitors.

Advertising can impede economic efficiency when it:

leads to greater monopoly power

(Last Word) Which market structure best characterizes the various Internet markets?

Differentiated oliopoly

A monopolistic competitor's long-run equilibrium output is such

that price exceeds the minimum average total cost (implying that consumers do not get the product at the lowest price attainable) and price exceeds marginal cost (indicating that resources are underallocated to the product).