UNIT 9 Flashcards
(27 cards)
A monopolistically competitive firm will increase its production if
MR is greater than MC
New firms will enter a monopolistically competitive market if
price is greater than ATC.
What is true of a monopolistically competitive market in long-run equilibrium?
Price is greater than marginal cost.
what is the rule for maximizing in a perfect competition?
MR = MC
Which of the following correctly describes long-run equilibrium for the oligopolist?
P > MC
What is characteristic of the Nash equilibrium?
economic actors who are interacting choose their best strategy given the strategies chosen by others. A Nash Equilibrium occurs when each player’s strategy is the best response to the strategies chosen by everyone else.
In which case will an oligopolist NOT raise production?
when the output effect is smaller than the price effect
Which of the following statement is correct about an oligopolistic market?
As the number of sellers in an oligopoly grows larger, an oligopolistic market looks more and more like a competitive market and the price approaches marginal cost
In the prisoners’ dilemma game, neither Bonnie nor Clyde has any information about the other’s decision. What is Clyde’s dominant strategy?
to confess irrespective of what Bonnie does
If the Organization of the Petroleum Exporting Countries (OPEC) is to be successful, what should each member state do?
agree on both the price and the amount to produce individually
Which term refers to the act of posting a list price below cost in the hope of gaining market share?
predatory pricing
What are the characteristics of monopolistic competition?
large number of sellers, differentiated products, some control over price, easy entry and exit, a lot of non price competition
what happens when a firm can produce at lower cost but it holds back production to maximize profit
excess capacity
what are the characteristics of Oligopolies?
a few large producers, identical of differentiated products, high barriers to entry, control over price (price maker)
how do ologopolies form?
economies of scale, high start up costs, ownership of raw materials, ownership of raw materials
what is a dominant strategy?
the best move to make regardless of what your opponent does.
what is a colluding oligopoly called?
cartel
what happens when a monoplolistically competative firm is in long run equilibrium?
price is equal to minimum average cost
For a monopolistically competitive firm, what happens at the profit-maximizing quantity of output?
price exceeds marginal revenue
In which market is economic profit driven to zero in the long run?
monopolistically competitive market
As the number of firms in an oligopoly market grows larger, the price will approach
What is the practice of tying used to do?
package products to sell at a combined price closer to a buyer’s total willingness to pay
When a new firm enters a monopolistically competitive market, what will happen to the individual demand curves faced by all existing firms in that market?
They will shift to the left.
hIt is higher than in monopoly markets and lower than in perfectly competitive markets.ow does equilibrium quantity in markets characterized by oligopoly compare with that in monopolies and perfectly competitive markets?
It is higher than in monopoly markets and lower than in perfectly competitive markets.
