| A | B |
|---|
| The world of imperfect competition is described by all of the following: [1, location; 2, "firms battle"; 3, profits] | 1. lies between the extremes of perfect comp. and monopoly; 2. is a world where firms battle over market shares; 3. is a world where econ profits may or may not persist in the long run |
| An industy characterized by many firms producing similar but differentiated products, in a market with easy exit and entry is called..... | "monopolistic competition" |
| The demand curve for a firm under monopolistic competition is ......, unlike....... | downward sloping, unlike the horizontal demand curve in perfect competition |
| Price for a firm under monopolistic competition... | is greater than marginal revenue |
| A firm in monopolistic comp. maximizes its profit by producing at the level where... | MC=MR |
| The profit maximizing rule MC=P is followed by .... but not by.... | perfectly comp. firms but not monopolistic comp. firms |
| In the long run, mono. comp. firms tend to experience... (profits) | zero economic profits |
| Mono. comp. within an industry results in... | chronic excess capacity |
| When the profit-max. level of output is less than the output associated with the minimum possible ATC of production, a firm is said to have... | excess capacity |
| The excess capacity in monopolistic comp. may be viewed as | the cost of product diversity |
| Monopolistic comp. is inefficient because... | monopolistically comp. firm charge a P>MC |
| All the following are true: 1) criticize because, 2) inefficient because, 3) price of inefficiency | 1) one can criticize mono. comp. because it falls short of the efficiency standards of perfect comp., 2) mono. comp. is inefficient because of product differentiation, 3) according to the text, the inefficiency may be a small price to pay for the wide range of product choices it offers. |
| Mono. comp. results in excess capacity since in the long run... | MR=MC to the left of the minimum of the ATC curve |
| A market structure that's characterized by a small no. of interdependent firms producing identical or differentiated products, and with barriers to entry and exit, is... | oligopoly |
| A concentration ratio is used to measure... | market dominance |
| Percentage of total industry output accounted for by the largest firms in the industry is termed... | the concentration ratio |
| The sum of the squared market shares of each firm in an industry is termed ... | the Herfindahl-Herschman Index |
| A monopoly will have a Herfindahl-Herschman index equal to about | 10,000 |
| An industry with two firms is generally termed a ... | duopoly |
| Overt collusion exists if firms agree openly on... | price, output, and other decisions aimed at achieving monopoly profits |
| Strategic choice is... | a decision based on the recognition that the actions of others will affect the outcome of the choice and that takes these actions into account |
| An analytical framework used in the analysis of strategic choices is ... | game theory |
| The outcome of a strategic choice is... | a payoff |
| Bad thing & good thing about advertisting: | 1) higher prices for customers, 2) provides education and information |
| The practice of charging different prices to buyers of the same good is... | price discrimination |
| A monopolist or imperf. comp. firm practices price discrimination primarily... | to increase profits |
| To practice effective price discrimination, a firm must.... | 1) have distinguishable customers, 2) differences in demand elasticity among buyers |
| Because tourist demad for airline flights is relatively elastic, small reductions in price will result in .... | relatively large increases in additional tourists |
