Chapter 17 and 18

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a nash equilibrium

I. is named after noble prize winner john nash II. occurs when each player chooses the best strategy given the strategy of the other player

when oligopolies seek to operate as a single price monopoly, the firms produce at the point where

MR=MC

In the long run a firm in monopolistic competition produces at an output level where

P=ATC and MR=MC

When a firm maximizes its profit, which of the following is correct for firms in monopolistic competition and perfect competition

P=MR=MC for firms in perfect competition and P>MR=MC for firms in monopolistic competition

What does monopolistic competition have in common with monopoly

a downward sloping demand curve

a cartel is

a group of firms acting together to raise price, decrease output and increase economic profit

Collusion results when a group of firms

act together to limit output, raise prices, and increase economic profit

to determine if a market is an oligopoly we need to determine if

the firms are so few that they recognize their mutual interdependence

a firm faces a small number of competitors this firm is competing in

an oligopoly

if the four firm concentration ratio for the market of diapers is 73 percent then this industry

an oligopoly

at a long run equilibrium in monopolistic competition price equals

average total cost

To maximize profit a firm in monopolistic competition will produce the quantity where marginal revenue

equals marginal cost

The major dilemma facing boeing and Airbus is the

fact that if each firm separately tries to maximize its profit, it might windup with less profit that other wise

In an oligopoly there are

few firms and barrier to entry

the tool that economists use to analyze the mutual interdependence of oligopolies is

game theory

a firm in monopolistic competition is

inefficient because price exceeds marginal cost

the US justice department

is likely to challenge a merger if the HHI exceeds 1800

when a city licenses only 3 taxi firms to serve the market the city has created a

legal oligopoly

if four firm concentration ratio of an industry is

less than 40, the industry is considered monopolistic competition

The marginal revenue curve facing a monopolistically competitive firm

lies below demand curve

concentration ratios

measure whether the market is dominated by a small number of firms

an industry with a large number of firms , differentiate products, and free entry and exit is called

monopolistic competition

if the HHI for the widget industry is 1,200 then the market structure is

monopolistic competition

Long run economic profits are most likely to be earned in

monopoly and oligopoly

An oligopoly created because of economies of scale is called a

natural oligopoly

Because of the number of firms in monopolistic competition

no one firm can dominate the market

a market in which the HHI exceeds 1800 is considered to be

not competitive

Which of the following is found ONLY in oligopoly

one firms actions affect another firms profit

The major difference between monopolistic competition and monopoly is

only a monopoly can earn an economic profit in the long run

If a firm in monopolistic competition is earning an economic profit

other firms can enter the market

if the four firm concentration ratio equals .1 percent for the Mexican tomato industry then this industry is best characterized as

perfect competition

which of the following is NOT a characteristic of long run equilibrium in monopolistic competition

production occurs at minimum average total cost

which of the following is the best example of a differential product

running shoes

in an oligopoly output is

somewhere between the output in monopoly and that in perfect competition outcomes

The herfindahl-Hirschman index measures market concentration in an industry by summing the square of the percentage marker shares for

the 50 largest firms

in a long run equilibrium a firm in monopolistic competition makes

zero economic profit

which of the following four firm concentration ratios would be the best indicator of a monopoly?

100 percent

because of product differentiation, firms

can compete on the basis of quality

Firms in an oligopoly

can each influence market price

A differentiated product has

close but not perfect substitutes

the concepts of mutual interdependence and game theory illustrate the fact that firm competing in oligopoly

consider the actions of the rivals before changing the price of their product

If a few oil producing countries in the middle east decide to jointly limit the production of oil

they are forming a cartel


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