Oligopoly and Monopolistic Competition Flashcards
List the competition number line…
1) perfect competition
2) monopolistic competition
3) oligopoly
4) monopoly
What has:
- price competition
- collusion
- few firms
- same or different products
Oligopoly
Profits in oligopolies?
Can be > 0
Oligopolies with different produce, profits?
P>MC
P>0
Oligopolies with same produce, profits?
P=MC
P=0
Where are long run profits greater than zero?
Oligopolies
Where are long run profits zero?
Monopolistic
- many firms
- free entry and exit
- firms produce different products
- Q set at MC=MR
Monopolistic
What is the use for advertising?
Maximize short run profits. And in monopolist case, lr profits = 0 so the only profits made are in the short run; maximize!
What is collusion?
Agreement to restrict quantity
Illegal
Increased price and profits from an a decreased quantity
Where do long run profits equal zero?
Monopolistic competition
How does producer equilibrium work?
When profits are less than zero producers will exit, hence demand will increase; this continues till profits equal zero. Once profits are above zero more producers will enter, bringing down demand and brining profits to zero.
What does perfect competition and monopolies don’t have to do?
Consider the behavior of competitors
When will profits of firms be higher?
When the goods are different
What makes collusion more sustainable?
Fewer firms
