PHASE 3: ADOBE CH. 9: Characteristics of Monopolistic Competition and Oligopoly Flashcards Preview

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Flashcards in PHASE 3: ADOBE CH. 9: Characteristics of Monopolistic Competition and Oligopoly Deck (33):
1

monopolistic competition

relatively large number of sellers, easy exit and entry to and from industry, differentiated products, more competitive than monopolistic ie. jewlery, kitchen cabinents,

2

monopolistic has how much control over price

fairly limited control but they do have some control, ensures no collusoin, no feeling of interdependece

3

do monopolistic competition have economies of scale or capital requirements

no, there are few economies of scale and low capital requirements

4

nonprce competitonn

make price less of a factor in consumer purchases and make product differences a greater factor - product differentiation

5

what does the demand curve faced by monopolisticlly competitive firm look like

highyl, but not perfectly elastic

6

larger number of rivals equals...

weaker product differentiation

7

monopolistic competiton in the long run earns

normal profit

8

monopolistic competiton maximize profit/min loss wehre

mr = mc

9

economic efficiency where

p = mc = minatc

10

productive effiency

p = min atc

11

allocative effiency

p = mc

12

monoopolistic competion has two virtures

promotes product variety and product improvement

13

oligopoly characteristics

a few large firm produces hoogenus or differentiated product, consierable control of prices, must consider prossible reaction of rivals to own pricing, few producers- big four, big three, big six - tires, beer, cereal etc

14

homogenus oligopoly

standardized products produced ie. cement, steel

15

differentiated oligopoly

consumer goods, heavy advertising ie . auto, tires

16

in oligoploy, the firm is the

price maker - sets price and output level, maximize profit, strategic behavior, mutual interdependece

17

oligopoly has

barriers to entry, equipment, patents, retalitory pricing

18

mergers

emerge through growth of dominant firms in given industry, clayton act, sherman act

19

sherman act

only monopolies unreasonbly restraining trade violate and subject to antitrust act - size does not equal offense

20

clayton act

when it substantially lessens competiton - flexbilie, interpretation

21

per se violation

activity specifically spelled out as violation of law - facts, not effects

22

rule of reasons

anticompetitive intent must be proven bc of mutual interdependence, ologpoy has charatcer of games of strategy must consider effects of opponent actions and our actions

23

theory of game

players, strategy, payoffs; oligopoy produces undfiferentiated product, decide whether to cut price

24

payoff

economic profit correspond to scenarios

25

payoff matrix

way to display info

26

price war

both firms cut price

27

dominant strategy

one player has strategy yileding higher payoff no matter which choice other player makes - may exist for netiehr player, both players or one player

28

nash equilibrium

each player's strategy is best he or she can choose given other players' choices - when game is in nash equiblirium, no player has incentive to switch sides unilaterally

29

prisoners dilemma

one in which each player has a dominant strategy but resulting payfofs smaller than if each had played a dominant strategy - both players better off than if both chose a dominated strategy

30

collusion

cooperation with rivals

31

what does oilgopoly graph look like

kinked demand model

32

price leadership

implicit understanding by which oligopolists can coordinate pries without engage in outirght ocllusion based on formal agreements and secret meetings, rather dominant firm intates price changes and all other firms move/less automatically follow leader

33

cartel

group of producers creating formal written agreement specifying how much each member produce/charge