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Exam 8: Market Entry, Monopolistic Competition, and Oligopoly

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Question 181

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Figure 8.10 -In Figure 8.10, airline Fly Smart is initially a secure monopoly between two cities X and Y at point M, serving 300 passengers per day at the profit maximizing price of $300 per ticket. Suppose that Fly Smart discovers that a second airline is contemplating entering the market. If the minimum market entry quantity is 130 passengers per day, Fly Smart's entry-deterring quantity is

A) 500 passengers per day.
B) 420 passengers per day.
C) 370 passengers per day.
D) 300 passengers per day.

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Question 182

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A dominant strategy is one that

A) maximizes profits.
B) is optimal under some conditions.
C) never yields a negative payoff.
D) is the best choice under all conditions.

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Question 183

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Which of the following is a characteristic of a monopolistically competitive market? I. There are many sellers. II) Firms sell slightly differentiated products. III) Each firm faces a downward-sloping demand curve.

Figure 8.9 -Consider Figure 8.9. If Becky's payoff in the top rectangle were 300 instead of 90, the outcome of the game would be that

The Sherman Act outlawed practices that result in the restraint of trade.

If price is less than average cost in a monopolistically competitive market

Recall the Application about the price competition between satellite and cable TV services to answer the following question(s) . -Recall the Application. In most cases where satellite TV service is introduced in an area with cable TV service, the quality of the cable TV service usually

Monopolistically competitive firms sell differentiated products.

The average-cost pricing policy provides a greater incentive for a regulated monopolist to reduce its production costs.

Recall the Application about the attempt to form a salt cartel in the 19th century to answer the following question(s) . -Recall the Application. One of the primary goals of the salt producers who tried to form a cartel was to

An oligopoly is an industry with just one firm.

A firm charges a price below its average total cost so that it drives out its competition. This is an example of

Figure 8.14 -The natural monopoly in Figure 8.14 wants to produce

If you were thinking of entering the ice cream business, would you make a product that is just like one that is already being produced? Explain.

Figure 8.14 -If price were regulated to be equal to long-run marginal cost the firm in Figure 8.14 would be

Which one of the following is the best example of an oligopolistic industry?

Recall the Application about food and drink pricing during "happy hour" at bars and restaurants to answer the following question(s) . -Recall the Application. During "happy hour," many bars and restaurants face an increase in demand for food and drink, and these establishments often cut prices during these times of increased demand. When this demand increases, the demand curve facing these bars and restaurants becomes

The word "competition" in the label "monopolistic competition" refers to the fact that

Monopolistically competitive firms have no benefits to consumers relative to perfectly competitive firms.

Figure 8.7 -Figure 8.7 shows a successful price-fixing arrangement (cartel) between two identical firms. If the cartel collapses and the two firms compete against each other, the price will be ________ and the quantity will be ________.