Lecture 26 (the next one): Imperfect competition

Question 1

What are the two examples of imperfect competition?

Answer 1

Monopolistic competition

Oligopoly

Question 2

Define imperfect competition

Answer 2

the market structures what fall between perfect competition and pure monopoly

Question 3

In imperfect competition, firms have competitors but do not face so much competition that they are price takers because of:

Answer 3

• some barriers to entry
• some product differentiated
• often both

Question 4

Define oligopoly

Answer 4

there are only a few sellers, each offering a similar or identical product to the others

Question 5

Define monopolistic competition

Answer 5

there are many firms selling products that are similar but not identical

Question 6

What are four characteristics of monopolistic competition?

Answer 6

• differentiated products
• many sellers
• low barriers to entry
• zero profits in the long run

Question 7

There are profits to be made in the short run of monopolistic competition. What does this lead to?

Answer 7

firm entry which leads to the demand curve shifting left and flatten (ie. more price elastic)

Question 8

If losses are made in the short run losses in monopolistic competition, what happens (and what does this lead to)?

Answer 8

firms will leave which will see the demand curve shift right and steepen (ie. more price inelastic)