Question

46. In terms of “market power” which of the below is correct, going from the firms with the most to the least “market power’? (Hint: envision the “level of competition” spectrum)

oligopoly, monopoly, perfect competition, monopolistic competition

monopoly, oligopoly, monopolistic competition, perfect competition

perfect competition, monopolistic competition, oligopoly, monopoly

monopolistic competition, monopoly, oligopoly, perfect competition

43. A cartel is (e.g. OPEC )

an agreement among rival firms to set prices independently

a group of monopolistically competitive firms which charge the same price

a group of oligopolistic firms that engage in formal collusion

a group of oligopolistic firms that engage in informal collusion

33. In the long run, a monopolist

will shut-down if it is incurring economic losses

earns a normal profit because other firms can easily enter the market

always earns an economic profit because of the existence of barriers to entry

can earn an economic profit because of the existence of barriers to entry

32. A monopolist will likely shut down in the short run if

price is less than average total cost (ATC)

price is less than average variable cost (AVC)

marginal revenue is less than AVC

price is less than average variable cost (AVC) and marginal revenue is less than AVC because for the monopolist, price = marginal revenue

marginal revenue is less than ATC

Answer 1

46

monopoly, oligopoly, monopolistic competition, perfect competition

Monopolist has the greatest market power since he is the only seller.

In oligopoly, there are only two sellers.

In monopolistic competition there are many sellers and buyers.

In perfect competition the entry and exit is free and there are numerous sellers and buyers.

43.

A group of oligopolistic firms that engage in formal collusion. The formal collusion would relate to prices, output, market powers, customers etc.

32.

If the price is less than average variable cost (AVC), then the monopolist will shut down.

33.

The monopolist will always earn an economic profit because of the existence of barriers to entry.