FLASHCARD 8 Oligopoly and Monopolistic Competition

Front

Which of the following best describes an oligopistic market? A few competing sellers with similar products and high barriers to entry

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A few competing sellers with similar products and high barriers to entry

Front

Back

Both companies have an incentive to reduce production by %10

Front

Game theory is used to explain

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strategic behavior of firms in oligopoly

Front

Based on the payoff matrix, which of the following is correct? Firm A always gets a smaller share of the industry profits. Firm A’s dominant strategy is to advertise. Firm B’s dominant strategy is not to advertise. The dominant strategy for both firms is not to advertise. Neither firm has a dominant strategy.

Back

Firm A’s dominant strategy is to advertise.

Front

The combination where Firm A advertises and Firm B does not advertise is Nash equilibrium because

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it is best for each firm given what the other firm has chosen

Front

Monopolistically competitive product markets are inefficient because

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price is greater than marginal cost

Front

A monopolistically competitive firm is currently producing the profit-maximizing level of output. If the price of a variable input increases, which of the following will occur? The firm will increase its output to increase its revenue. The firm will increase the price of its output by the same amount. The firm’s average total cost and marginal cost curves will shift upward. The firm’s average fixed cost will decrease as it decreases production. The firm’s fixed cost will increase, but its output level will be unaffected.

Back

The firm’s average total cost and marginal cost curves will shift upward.

Front

One difference between oligopolies and monopolistically competitive markets is that there are fewer firms in oligopolistic markets than in monopolistically competitive ones

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There are fewer firms in oligopolistic markets than in monopolistically competitive ones.

Front

Which of the following must be true if a profit-maximizing monopolistically competitive firm continues to operate in the short run while incurring a loss?
Marginal revenue equals marginal cost and price is greater than average total cost.
Marginal revenue equals marginal cost and price is greater than average variable cost.
Marginal revenue equals marginal cost and price is less than average variable cost.
Price equals both marginal cost and marginal revenue.
Price is less than marginal revenue, but greater than average variable cost.

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Marginal revenue equals marginal cost and price is greater than average variable cost.

Front

What is the profit-maximizing price and quantity? Options: P₁, Q₁, P₂, Q₄, P₃, Q₃, P₄, Q₂, P₅, Q₁

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P₅, Q₁