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24 terms

UPG ECON100 CH11

STUDY
PLAY
In monopolistic competition, many firms
create differentiated products
Monopolistic Competition is characterized by
a large number of firms and low entry barriers
In Monopolistic Competition, entry to industry is
more difficult than under pure competition, but not nearly as difficult as pure monopoly
The Monopolistic Competition model assumes
firms will engage in non-price competition
non-price competition
advertising product promotion and changes in the real or perceived characteristics of a product
Monopolistic Competition have ____ demand curves
highly elastic
Monopolistic Competition firms may realize either profits or losses in the short run, but realize _____ in the long run
normal profits
Monopolistic Competition in the short run
a profit maximizing firm sets it's price above marginal cost
Monopolistic Competition in the long run
a profit maximizing firm sets it's price about marginal cost and will be equal to average total cost (ATC); new firms will enter industry until economic profits are zero
Excess Capacity
refers to the amount by which actual production falls short of the minimum ATC output
Monopolistic Competitive Industries are inefficient because
they are over populated with firms whose plants are under utilized
Oligopoly indicates ____ firms with either ______ or ______ products
few; homogeneous; differentiated
Oligopoly industries are characterized
as a few dominate firms and substantial entry barriers
Homogeneous Oligopoly
exist where a small number of firms are producing virtually identical products
Examples of Homogeneous Oligopoly
The copper, aluminum, cement and industrial alcohol industries
Differentiated Oligopoly
exists where a small number of firms are producing goods that differ in terms of quality and design
Examples of Differentiated Oligopoly
automobile, household appliance, and automobile tire industries are examples
Oligopoly is difficult to analyze because
the price and output decision for any one firm depends on the reactions of it's rivals
Mutual Interdependence
each oligopolistic firm must consider the reactions of it's rivals when it determines it's price policy
Inter-industry competition
in some markets the producers of a particular product might face competition from product produces by other industries
The likelihood of a Cartel being successful
is greater when cost and demand curves of various participants are very similar
Cartels are difficult to maintain in the long run because
individual members may find it profitable to cheat on agreements
Cartels are in violation
of the U.S. antitrust laws
The economic inefficiencies of Monopolistic Competition may be offset by the fact that
consumers have a number of variations of the product from which to choose