Unit 4

Question 1

Monopolistic comp

Answer 1

Large number
Different products
Easy entry exit
Some control of P
Independent

Short run: MR = MC
Long run: Normal profit

Question 2

Oligopoly

Answer 2

A few
Price control
Barriers to entry exit
Mergers
(Differential-autos and homogenous-steel)
Mutually interdependent

CONCENTRATION RATIO:
% sales made by 4 largest firms

HERFINDAHL INDEX:
Sum of squared % of all firms

KINKED DEMAND:
Rivals match P decrease ignore P increase, change in MC may not affect Q

Question 3

Imperfectly competitive markets

Answer 3

Small
Competition/substitutes
High barriers entry exit
Different products

Question 4

Monopolistic allocative efficiency ?

Answer 4

D and MC

NOT MCMR