Imperfect Competition Test

Question 1

Is a monopoly a price maker of price taker?

Answer 1

Price maker

Question 2

Do monopolies advertise?

Answer 2

Mainly with PR

Question 3

Do monopolies have Barriers to exit/entry?

Answer 3

Extensive

Question 4

Why do monopolies have a downward sloping demand curve?

Answer 4

They have to drop the price to sell the next unit

Question 5

What are examples of monopolies?

Answer 5

Utilities, DeBeers diamonds, MLB, NFL, airlines

Question 6

What are the barriers to entry for monopolies?

Answer 6

Economies of scale, legal, raw materials, pricing

Question 7

What is price cutting?

Answer 7

Sell at a loss to get rid of your competition

Question 8

What is dumping?

Answer 8

Flooding the market with a product so it losses its value to get rid of competition

Question 9

What usually ends a monopolies power?

Answer 9

Technology

Question 10

An unregulated monopoly is also called what?

Answer 10

Single price monopoly

Question 11

Unregulated monopolies charge what price?

Answer 11

The same price for everyone

Question 12

In an unregulated monopoly where is MR in relation to the D curve??

Answer 12

Below it

Question 13

All imperfect firms must operate in the?

Answer 13

Elastic portion

Question 14

Why is their no supply curve for a monopoly?

Answer 14

They create the supply

Question 15

Do monopolists want the most profit per unit?

Answer 15

No most profit in general

Question 16

Are monopolies immune to changes in demand or increased costs of resources?

Answer 16

No

Question 17

Are monopolies allocative or productive efficiency?

Answer 17

Neither

Question 18

What are the problems monopolies face?

Answer 18

EOS, x-inefficiency, rent seeking expenditures, technology

Question 19

Why does EOS hurt monopolies?

Answer 19

Reduced output could lead to ineffienciency

Question 20

Why does x-ineffienciency hurt monopolies?

Answer 20

They produce at higher costs than necessary because of poor management

Question 21

Why do rent seeking expenditures hurt monopolies/ what are they?

Answer 21

They spend to much to maintain their monopoly, they fund legislators to get legislation passed in their favor

Question 22

Why does technology hurt monopolies?

Answer 22

Don’t search for new technology because they don’t think they have competition and they become obsolete

Question 23

What is a price discriminatory monopoly?

Answer 23

Sells different prices to different people

Question 24

What makes a monopoly able to price discriminate?

Answer 24

It can segment the market, has a product that isn’t resell able, and it gets rid of consumer surplus

Question 25

The MR and D curve for what type of monopoly is the same curve?

Answer 25

Price discriminatory

Question 26

What would happen if monopolies tags should be regulated weren't?

Answer 26

They would produce a lot less and many people would go without

Question 27

Why can't regulated monopolies produce at the socially optimal price?

Answer 27

They would be producing at a loss and be subsidized

Question 28

Where do regulated monopolies produce?

Answer 28

The fair return price

Question 29

Unregulated monopolies produce at what price?

Answer 29

The monopoly price | MR=MC up to D curve

Question 30

Regulated monopolies produce at the fair return price which is where?

Answer 30

P=ATC

Question 31

Where is the socially optimal price?

Answer 31

P=MC

Question 32

A regulated monopoly graph is recognizable how?

Answer 32

The MC curve will be mainly below the ATC

Question 33

How many firms are in monopolistic competition?

Answer 33

About 40-50

Question 34

What kind of products for monopolist competitive firms produce?

Answer 34

Differentiated products

Question 35

Do monopolistic competitive firms have price control?

Answer 35

Some

Question 36

Do monopolistic competitive firms advertise?

Answer 36

Yes, a lot

Question 37

Are their barriers to exit/entry for monopolistic competition?

Answer 37

No, easy entry/exit

Question 38

Is monopolistic competition allocative or productive?

Answer 38

Neither

Question 39

What does monopolistic competition rely on to separate itself from rivals?

Answer 39

Brand Names, product attributes, services, and location

Question 40

The demand curve of a monopolistic competitive firm is more or less elastic than a monopoly's?

Answer 40

More

Question 41

What are the goals of advertising?

Answer 41

To increase demand, and make demand more inelastic

Question 42

What monopolistic qualities does monopolistic competition have?

Answer 42

Some price control, demand above MR, Ads, neither efficiency

Question 43

What pure competitive qualities does monopolistic competition have?

Answer 43

Big # of firms, easy exit/ entry, no long run economic profit

Question 44

What does monopolistic competition do to sell more units?

Answer 44

Drop the price

Question 45

Does a monopolistic competition earn of profit in the long run?

Answer 45

No because of easy exit/entry

Question 46

What is earned in the long run for monopolistic competition?

Answer 46

Normal profit

Question 47

What makes the ATC curve tangent to the demand curve in monopolistic competition?

Answer 47

Excess capacity

Question 48

What is excess capacity?

Answer 48

Under allocation of resources; this occurs when the price and quantity produced is the normal profit

Question 49

How many producers are in an oligopoly?

Answer 49

A small #

Question 50

What type of products do oligopolies produce?

Answer 50

Differentiated or standardized

Question 51

What are differentiated products?

Answer 51

Consumer products, house held items, cars, tires, etc

Question 52

What are standardized products?

Answer 52

Steel, zinc, copper, etc

Question 53

Do oligopolies have price control?

Answer 53

Yes; mutual interdependence

Question 54

Are there barrier to exit/entry in oligopoly?

Answer 54

Monetary barrier to exit/entry

Question 55

What are tha barriers to entry for oligopoly?

Answer 55

Large EOS, patents, ads are costly, ownership of raw materials

Question 56

What is the concentration ratio?

Answer 56

The 4 largest firms sales

Question 57

What is wrong with the concentration ratio?

Answer 57

It gives the false impression that all 4 are equal

Question 58

What is the Herfindahl index?

Answer 58

It shows the dominance of each firm; it's a squared percentage

Question 59

What is 100 squared on the Herfindahl index?

Answer 59

A pure monopoly

Question 60

What is collusion?

Answer 60

Price setting

Question 61

What are cartels?

Answer 61

They get together and agree on production quotas and sell at a common price to maximize price( they are each individually like miny monopolies)

Question 62

What is overt collusion?

Answer 62

It's out in the open; like OPEC which is other countries, the US can't interfere and control them

Question 63

What is covert or tacit collusion?

Answer 63

A gentlemen's agreement, it is illegal

Question 64

What normally happens during collusion?

Answer 64

One firm is dominant and sets the price and the other follow suit

Question 65

What type of firm has collusion?

Answer 65

Oligopoly

Question 66

What type of efficiency is an oligopoly?

Answer 66

Neither

Question 67

What are the obstacles for collision?

Answer 67

Cost differences, # of firms, cheating; other firms entering the market, anti-trust laws, and recessions

Question 68

What happens in the elastic portion of an oligopoly?

Answer 68

The firm ignores rival's price increases and it steals from or losses business to its rivals

Question 69

What happens in the inelastic portion of an oligopoly?

Answer 69

The firm will match rivals price changes and it steals business from other industries

Question 70

What price will on oligopoly charge?

Answer 70

MR=MC

Question 71

What are the types of imperfect competition?

Answer 71

Pure monopoly, monopolistic competition, and oligopoly

Question 72

What are common thins in imperfect completion?

Answer 72

Neither allocative or productive efficiency, downward sloping demand curves, MR is below demand for all graphs except discriminatory monopolies, have to operate in the elastic portion

Question 73

A single firm is the producer of a product that has no close substitutes

Answer 73

Monopoly