Exam 13: Between Competition and Monopoly

Suppose that a firm in monopolistically competitive market is producing 30 units of output.At this level of production, the firm charges $50 per unit.Its marginal cost is $24 and marginal revenue is $24, and average cost is $20 per unit.Given this information, in the long run you would expect

In the long run, a monopolistically competitive firm earns small economic profits.

The kinked demand curve model is based on the assumption that rival firms will match a price cut but ignore a price increase.

If a player in a game has a dominant strategy, her choice will depend upon the strategy that another player has chosen.

If a firm decides to ignore the reactions of its rivals to its policies, the appropriate model to analyze its behavior is

A dominant strategy is one that gives a player in a game a bigger payoff than the other player receives.

A common characteristic in oligopolistic markets is

A profit-maximizing, monopolistically competitive car wash washes 40 cars per day, and its total cost $200 and currently makes an economic profit of $280.In the long run, everything else equal, the

Monopolistically competitive markets feature heterogeneous products.

Game theory is not useful for analyzing perfectly competitive markets.

All of the following are possible characteristics of oligopoly except

In an oligopoly market, the firms would earn the highest profit if they

The demand curve for a monopolistic competitor is likely to be steeper than that of a monopolist.

If two firms form a successful cartel, then the output that the two produce in total will

An oligopoly firm with a differentiated product will generally earn the largest profits without advertising.

Jimmy's java shop operates in a monopolistically competitive market.Jimmy's current output is where average costs are minimized.If this is the case, we would expect Jimmy to

Suppose that we learn that hotels in Los Angeles generally operate with an average vacancy rate of 15 percent (in other words, 85 percent of the hotel rooms are filled with guests).Given this information about excess capacity, we would judge this market to be

Economists would describe cartels as

An oligopolist who sets the price for the industry is a price leader.

A cartel is a group of sellers of a single product who have joined together in order to enjoy the advantages of perfect competition.