Economics Chap 13 Review

9/24/2016
MonopolisticCompetitionandOligopolyFlashcards|Quizlet
Monopolistic Competition and

Oligopoly
50 terms by ATurbyll96
In the short-run, a prot-maximizing

monopolistically competitive rm sets its
price:
above marginal cost.
Concentration ratios may be inaccurate

indicators of the degree of monopoly
power in an industry because:
foreign competition is not considered.
The more elastic a monopolistic

competitor's long-run demand curve, the:
lower its average total cost at its prot

maximizing level of output.
As a general rule, oligopoly exists when the

four-rm concentration ratio:
is 40 percent or more.
Ineciencies occur under monopolistic

competition because:
each rm's downsloping demand curve is

tangent to the ATC curve in the long run.
Nonprice competition refers to:
advertising, product promotion, and

changes in the real or perceived
characteristics of a product.
The mutual interdependence that

characterizes oligopoly arises because:
a small number of rms produce a large

proportion of industry output.
A signicant benet of monopolistic

competition compared with pure
competition is:
greater product variety.
Clear-cut mutual interdependence with

respect to the price-output policies exists
in:
oligopoly.
The kinked-demand curve of an oligopolist

is based on the assumption that:
competitors will follow a price cut but

ignore a price increase.
In the short-run, the price charged by a

monopolistically competitive rm
attempting to maximize prots:
may be either equal to ATC, less than ATC,

or more than ATC.
For a monopolistically competitive rm in

long-run equilibrium:
price will equal average total cost.
https://quizlet.com/78359375/monopolisticcompetitionandoligopolyflashcards/
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T/F: Homogenous oligopolists tend to

advertise more than do dierentiated
oligopolists.
false
The monopolistic competition model

assumes that:
rms will engage in nonprice competition.
T/F: The excess capacity problem

associated with monopolistic competition
implies that fewer rms could produce the
same industry output at a lower total cost.
true
The four-rm sales concentration ratio for

an industry measures the:
extent to which the four largest rms

dominate the production of a good.
Use your basic knowledge and your

understanding of market structures to
answer this question. Which of the
following companies most closely
approximates a monopolistic competitor?
Subway Sandwiches
T/F: The demand curve of a

monopolistically competitive rm is more
elastic than that of a pure monopolist.
True
The restaurant, legal assistance, and

clothing industries are each illustrations of:
monopolistic competition.
The monopolistically competitive seller's

demand curve will become more elastic
the:
larger the number of competitors.
T/F: Mutual interdependence means that

oligopolistic producers rely on price
competition in determining their shares of
the total market for their product.
false
If an oligopolist is faced with a marginal

revenue curve that has a gap in it, we may
assume that:
its demand curve is kinked.
T/F: Oligopolists use limit pricing to

maximize short-run prots.
False
Oligopoly is dicult to analyze primarily

because:
the price and output decisions of any one

rm depend on the reactions of its rivals
The price elasticity of a monopolistically

competitive rm's demand curve varies:
directly with the number of competitors,

but inversely with the degree of product
dierentiation.
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Aluminum competes with copper in the

market for power transmission lines. This
illustrates:
interindustry competition.
T/F: Generally speaking, the larger the

number of rms in an oligopolistic industry,
the more dicult it is for those rms to
collude.
True
If competing oligopolists completely

ignore oligopolist X's price changes, then
X's:
demand curve will be more elastic than if

the other oligopolists matched X's price
changes.
Nonprice competition refers to:
product development, advertising, and

product packaging.
In long-run equilibrium monopolistic

competition entails:
an underallocation of resources.
If an oligopoly is faced with a kinkeddemand curve that is relatively elastic

above, and relatively inelastic below, the
going price, then it will:
decrease total revenue by either increasing

or decreasing price.
T/F: Firms are more likely to collude when

the economy is in a recession.
False
Which of the following industries is an

illustration of homogeneous oligopoly?
aluminum
In which of these continuums of degrees of

competition (highest to lowest) is oligopoly
properly placed?
pure competition, monopolistic

competition, oligopoly, pure monopoly
T/F: The larger the number of rms and the

less the degree of product dierentiation,
the greater will be the elasticity of a
monopolistically competitive seller's
demand curve.
True
Monopolistic competition means:
many rms producing dierentiated

products.
Concentration ratios:
may understate the degree of competition

because they ignore imported products.
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Which of the following statements is

correct?
In the long run purely competitive rms and

monopolistically competitive rms earn
zero economic prots, while pure
monopolies may or may not earn economic
prots.
Homogeneous oligopoly exists where a

small number of rms are:
producing virtually identical products.
T/F: Monopolistically competitive sellers

produce eciently because they obtain
only normal prots in the long run.
false
The economic ineciencies of monopolistic

competition may be oset by the fact that:
consumers have a number of variations of

the product from which to choose.
T/F: The monopolistically competitive seller

maximizes prots by equating price and
marginal cost.
False
Which of the following is the best example

of oligopoly?
automobile manufacturing
Prices are likely to be least flexible:
in oligopoly.
In the long run, new rms will enter a

monopolistically competitive industry:
until economic prots are zero.
T/F: Two industries that have the same 4rm concentration ratio can have
signicantly dierent Herndahl indexes.
True
In the long-run, economic theory predicts

that a monopolistically competitive rm
will:
have excess production capacity.
Use your basic knowledge and your

understanding of market structures to
answer this question. Which of the
following companies most closely
approximates a dierentiated oligopolist in
a highly concentrated industry?
Ford Motor Company
In monopolistically competitive markets

resources are:
underallocated because long-run

equilibrium occurs where price exceeds
marginal cost.
Monopolistically competitive and purely

competitive industries are similar in that:
there are few, if any, barriers to entry.
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9/24/2016

Monopolistic Competition and

In the short-run, a prot-maximizing

above marginal cost.

Concentration ratios may be inaccurate

foreign competition is not considered.

The more elastic a monopolistic

lower its average total cost at its prot

As a general rule, oligopoly exists when the

Ineciencies occur under monopolistic

each rm's downsloping demand curve is

Nonprice competition refers to:

advertising, product promotion, and

The mutual interdependence that

a small number of rms produce a large

A signicant benet of monopolistic

greater product variety.

Clear-cut mutual interdependence with

The kinked-demand curve of an oligopolist

competitors will follow a price cut but

In the short-run, the price charged by a

may be either equal to ATC, less than ATC,

For a monopolistically competitive rm in

price will equal average total cost.

T/F: Homogenous oligopolists tend to

The monopolistic competition model

rms will engage in nonprice competition.

T/F: The excess capacity problem

The four-rm sales concentration ratio for

extent to which the four largest rms

Use your basic knowledge and your

T/F: The demand curve of a

The restaurant, legal assistance, and

The monopolistically competitive seller's

larger the number of competitors.

T/F: Mutual interdependence means that

If an oligopolist is faced with a marginal

its demand curve is kinked.

T/F: Oligopolists use limit pricing to

Oligopoly is dicult to analyze primarily

the price and output decisions of any one

The price elasticity of a monopolistically

directly with the number of competitors,

Aluminum competes with copper in the

T/F: Generally speaking, the larger the

If competing oligopolists completely

demand curve will be more elastic than if

Nonprice competition refers to:

product development, advertising, and

In long-run equilibrium monopolistic

If an oligopoly is faced with a kinkeddemand curve that is relatively elastic

decrease total revenue by either increasing

T/F: Firms are more likely to collude when

Which of the following industries is an

In which of these continuums of degrees of

pure competition, monopolistic

T/F: The larger the number of rms and the

Monopolistic competition means:

many rms producing dierentiated

may understate the degree of competition

Which of the following statements is

In the long run purely competitive rms and

Homogeneous oligopoly exists where a