Chapter 11 - Imperfect Competition and Strategic Behaviour Flashcards
What can an industry with many small firms do unlike in perfect competition?
Differentiated products
Advertising
Market power
What is a highly concentrated industry?
Has a small number of relatively large firms
What is monopolistic competition?
Large number of small firms with some market power
What is oligopoly?
Small number of large firms each with considerable market power
What is an imperfectly competitive market structure?
Not a monopoly, not in perfect competition
Most firms in imperfectly competitive markets sell _ products
Differentiated
A price setter faces a _-sloping DC
Downward
Is the DC for a monopolistic competition highly elastic or inelastic?
Elastic
All firms in monopolistic competition have the same _ curve
Cost
Firms are free to enter and exit the industry in monopolistic competition. T/F?
True
What occurs when the DC is tangent to the LRAC?
Each firm is still maximizing profit, but profit is = 0
In the LR equilibrium, each firm has _
Excess capacity
A firm selling more would reduce revenue (more/less) than it reduces cost
More
An oligopolistic firm faces (many/few) competitors
Few
What 2 things can oligopolistic firms do?
Cooperate/collusion and max joint profits
Compete and max individual profits
If firms cooperate, they yield (high/low) output and (high/low) price. Thus earning (small/large) profits
Low, high, large
If firms compete, they yield (high/low) output and (high/low) price. Thus earning (small/large) profits
High, low, small
A non-coop equilibrium is also known as _ equilibrium
Nash
Differentiate explicit vs tacit collusion
Explicit is when firms formally agree
Tacit is cooperation without formal agreement
Describe brand proliferation
The more differentiated products an existing oligopolist has, the smaller the market share is to entering firms with just one product
Oligopoly leads to more _ than in either perfect competition or monopoly
Innovation
