Man Ec: #10 Flashcards
What is the difference between a pure oligopoly and a differentiated oligopoly?
The difference is in a pure oligopoly the products are not differentiated, but rather are standardized.
ex. pure: steel, aluminum, plywood, etc. Differentiated: automobiles, cereal, cigarettes, etc.
In an oligopoly situation are entry costs low or high?
They are very high. A company has to produce a lot at low cost to make it work.
In the long run rival firms charge prices that are ______
in the case of pure oligopoly or _________ in the case of differentiated.
identical; comparable
Collusion is the (riskiest or safest) form of a industry deciding on a price structure. Which is is.
riskiest and most fragile, it outlawed by anti-monopoly statutes, and because of the temptation to cheat
In long-run equilibrium in a monopolistically competitive market, firms will produce at the output rate where price equals long-run average cost.
true false
true
Only if the product group can block entry can any pure profit be maintained. This means the long-run trend is for the demand curve to fall until the LRAC rests on it.
It is in the interest of monopolistically competitive firms to promote uniformity and product homogeneity in the market.
true false
fa;se
By differentiating their product they can charge a slightly higher price than would be the case under pure competition with its homogeneous product.
In the long run, the prices of monopolistically competitive firms tend to move toward a level that produces a normal profit.
true false
true
Only if the product group can block entry can any pure profit be maintained. This means the long-run trend is for the demand curve to fall until the LRAC rests on it.
Some socialistically oriented individuals historically have condemned product differentiation declaring that it
is a form of social waste
permits the price to exceed the marginal revenue
promotes egotism in the form of profit maximization
panders to capitalistic tastes
a
A monopolistically competitive firm, like a normal monopoly wishing to maximize profits cannot operate on the inelastic segment of its demand curve because
when demand is elastic and the price goes down, TR falls
such a firm cannot ethically operate on the inelastic segment of its demand curve and conduct the marketing campaign needed for product differentiation required by monopoly competition
when demand is inelastic, MR is negative and cannot be equated with MC
this can be done only in an oligopoly industry
c
Which of the following is not characteristic of a monopolistically competitive situation?
Demand is elastic in the range of the prevailing price.
Selling price is equal to the same value as marginal revenue
Each firm has a small measure of discretion in setting the price of its product
Each firm is confronted with down-sloping demand and average revenue curve
b
The efficiency of pure competition exceeds that of monopolistic competition because
the demand curve of the competitive firm, upon which its LRAC curve rests, is perfectly flat
purely competitive firms can differentiate their product at lower cost
purely competitive firms can produce with cost savings based on economies of scope
the workers in monopolistic competition always demand higher wages, which results in higher prices
a
In monopolistic competition, we usually encounter
very few sellers collusion heavy price competition product differentiation
d
In long-run equilibrium in a monopolistically competitive market firms will sell at the same price.
true false
false
There will be a cluster of prices at roughly the same level, but the prices will not be identical as in pure competition.
The largest barrier to entry in monopolistically competitive markets is the large capital expenditure required to enter the industry.
true false
false
Monopolistic competition usually attempts to block entry by requiring a license to operate in this market. Typically, products in these product groups do not require huge capital expenditures.
