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ECON111 > Chapter 10 > Flashcards

Chapter 10 Flashcards

1
Q

What market did Proctor & Gamble, Henkel, Unilever, and Colgate-Palmolive control in France?

A

90 percent of soap market

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2
Q

Characteristics of a perfectly competitive market

A

Many firms, identical products, price takers

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3
Q

What type of demand curve does a perfectly competitive firm face?

A

Perfectly elastic

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4
Q

What is a monopolist’s perceived demand curve?

A

Market demand curve

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5
Q

What is marginal revenue?

A

Change in total revenue per quantity

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6
Q

What is an oligopoly?

A

Few large firms dominate industry

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7
Q

What do firms in a cartel aim to produce?

A

Monopoly output

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8
Q

What organization has agreements to act like a monopoly?

A

OPEC

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9
Q

What was the goal of the French soap firms’ secret meetings?

A

Stamp out competition and set prices

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10
Q

When does a monopoly arise?

A

Single firm, no close substitutes

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11
Q

What type of demand curve does a monopoly face?

A

Market demand

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12
Q

What type of competitors face entry barriers?

A

Monopolists

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13
Q

What do people prefer in an economy?

A

Variety of products

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14
Q

What happens if oligopolists compete hard?

A

Act like perfect competitors

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15
Q

What is collusion?

A

Anti-competitive behavior

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16
Q

What incentive do firms in an oligopoly have?

A

Produce more for market share

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17
Q

What are some intangible aspects that can differentiate a product?

A

Guarantees, reputation, services

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18
Q

What defines monopolistic competition?

A

Many firms, differentiated products

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19
Q

What happens if a monopolistic competitor earns positive economic profits?

A

Other firms enter

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20
Q

What do critics argue about product differentiation in market-oriented economies?

A

Socially wasteful

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21
Q

What is a potential outcome of oligopolists colluding?

A

Act like a monopoly

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22
Q

What is illegal in the U.S. regarding collusion?

A

Violates antitrust law

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23
Q

What is oligopoly?

A

Second most common market structure

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24
Q

What type of market do most retailers encounter?

A

Monopolistically competitive

25
Q

How does a monopolistically competitive firm perceive demand?

A

Intermediate case between monopoly and competition

26
Q

How is marginal cost calculated?

A

Change in total cost / Change in quantity

27
Q

How does the leftward shift in marginal revenue affect profit-maximizing quantity?

A

Decreases it

28
Q

In the long run, economic profits for a monopolistically competitive firm become?

A

Zero

29
Q

Why is the controversy about market variety difficult to resolve?

A

Optimal amount of variety is hard to determine

30
Q

How can an oligopoly be created?

A

Government patents for similar products to multiple firms

31
Q

Why are cartel agreements rare in the United States?

A

Provide evidence of collusion

32
Q

What is the consequence of raising prices in an oligopoly?

A

Loss of sales share

33
Q

What characterizes oligopolies?

A

High barriers to entry

34
Q

Demand curve for perfectly competitive firm?

A

Perfectly elastic

35
Q

How is average cost calculated?

A

Total cost / Quantity

36
Q

What does zero economic profit indicate?

A

Accounting profit equals next best use

37
Q

What creates a natural monopoly?

A

Single firm at minimum cost

38
Q

What type of collusion is most common?

A

Tacit collusion

39
Q

What is the result of oligopolists matching price cuts but not increases?

A

Minimal incentive to change prices

40
Q

Demand curve faced by monopolist?

A

Downward sloping

41
Q

What happens when price is above average cost?

A

Positive economic profits

42
Q

How many oligopoly firms can the market accommodate?

A

Two or three

43
Q

What can the cartel manage to do despite no legal agreement?

A

Hold down output and increase price

44
Q

Can a monopolistic competitor raise its price without losing all customers?

A

Yes

45
Q

Which type of firm’s demand curve is downward-sloping?

A

Monopolistic competitor

46
Q

How does the demand curve of a monopolistically competitive firm compare to that of a monopoly?

A

More elastic

47
Q

What do positive economic profits attract?

A

Competing firms

48
Q

In perfect competition, what is price set equal to?

A

Marginal cost

49
Q

What creates the barrier to entry in large passenger aircraft?

A

Economies of scale and market demand

50
Q

Definition of price takers

A

Firms with no market power

51
Q

When was the theory of imperfect competition developed?

A

1933

52
Q

What happens when a monopolist raises its price?

A

Consumers buy different product

53
Q

What type of market do golf ball manufacturers operate in?

A

Monopolistically competitive

54
Q

When does entry into the industry cease?

A

When zero economic profits

55
Q

What reflects allocative efficiency in perfect competition?

A

Marginal benefit equals marginal cost

56
Q

What is monopolistic competition?

A

Imperfectly competitive market type

57
Q

What do some consumers do when a monopolistic competitor raises its price?

A

Buy similar product

58
Q

How does a monopolistic competitor decide price and quantity?

A

Similar to monopolist

ECON111 (31 decks)

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