Question

1. Suppose a market is in equilibrium (i.e., S=D and profits are normal). If demand increases in this market, the equilibrium price will _____________. Ceteris paribus, what effect will this have on profits?  ______________. What happens next to this market and why? __________________. As a result, what happens to price at the new equilibrium? _______________

2. What does the “double price move” or “price reversal” refer to?

3. At equilibrium in an oligopoly, the size of economic profits will usually depend on the strength of ____________

4. Cartels – What they are and what they seek to do?

5. Suppose a market that had been in equilibrium experiences an increase in demand that result in a higher price for the product. What should you expect to happen to the price in the future and why?

6. We have described oligopoly as often having two very different faces. On the one hand, we often see oligopolies where the firms behave as __________________. On the other hand, we often see oligopolies where firms behave as ______________________

7. In a purely competitive market, an innovation that lowers cost will cause the market price to _________________________

8. Do cost reductions in monopolies or oligopolies usually lead to price reductions? __________. What might happen instead? _______________________________

9. What produces a “natural monopoly?” ____What are patent monopolies? ____

Answer 1