Unit 10 Monopolistic Competition and Oligopoly

Question 1

Monopolistic Competition

Answer 1

A market structure with many firms selling products that are substitutes but different enough that each firm’s demand curve slopes downward; firm entry is relatively easy

Question 2

Product Differentiation

Answer 2

Physical Differences, Location, Services, Product Image

Question 3

Excess Capacity

Answer 3

The difference between a firm’s profit-maximizing quantity and the quantity that minimizes average cost (In monopolistic competition, firms fall short of producing the quantity that would achieve the lowest average cost as opposed to perfect competition)

Question 4

Oligopoly

Answer 4

A market structure characterized by a few firms whose behavior is interdependent

Question 5

Undifferentiated Oligopoly

Answer 5

An oligopoly that sells a commodity or a product that does not differ across suppliers, such as an ingot of steel or a barrel of oil.

Question 6

Differentiated Oligopoly

Answer 6

An oligopoly that sells products that do differ across suppliers, such as automobiles or breakfast cereal.

Question 7

Collusion

Answer 7

An agreement among firms to increase economic profit by dividing the market or fixing the prices

Question 8

Cartel

Answer 8

A group of firms that agree to coordinate the production and pricing decisions to act like a monopolist

Question 9

Price Leader

Answer 9

A firm whose price is adopted by other firms in the industry