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24 Cards in this Set
- Front
- Back
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List characteristics of monopolistic competition
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Many firms, free entry. Differentiate product.
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Characteristics of an oligopoly
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Few firms, limited entry
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Strategetic behavior
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firm behavior that takes into account the market power and reactions of other firms in the industry
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2 reasons producers want to differentiate their products
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-maximize profit
-can be of value to consumers looking to match their tastes and producer may be able to suit their niche |
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Product differntiation
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when sellers in a monopolistic competition try to differentiate between their products and those of their competitors
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Phenomena that can be explained by product differentiation
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-Interindustry trade
-Inraindustry trade -advertising -need for consumer information services |
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Why do some economists believe advertising is wasteful?
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It only changes PERCEPTIONS of two similar products, rather than actual differences
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Interindustry trade
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Trade between countries in goods from different industries
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Intraindustry trade
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trade made between countries in goods from the same industry
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4 ways in which products can be differentiated
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-Physical characteristics
-Service after sale -location -time |
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Invented the model of monopolistic competition
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Edward Chamberlain
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This curve shows monopolistic competition
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downward sloping demand curve
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In the short run, a monopolistically competitive firm can earn what types of profit?
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Positive, negative, or zero profit
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When a new firm enters a monopolistic competition's industry, the curve moves how?
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move to the left
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When a firm leaves MC's industry, what happens to the remaining firm's demands?
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Increases; its one less firm to take away business
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What info does oligopolies use to make decisions?
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other firms' actions
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Game theory
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branch of applied mathematics with many uses in economics, including the analysis of the interaction of firms that take others' actions into account
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Prisoner's dilemma
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game in which individual incentives lead to a nonoptimal, noncooperative outcome. If players choose to cooperate, they achieve the best outcome.
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The cooperative outcome for the prisoner's dilemma
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both shut up
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Cournot competition
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when oligopolies compete in quantities
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Bertrand Competition
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when oligopolies compete in prices
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Collusion
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when firms combine and maximize profits and compete and interact over a long period of time
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The difference between explicit and tacit collusion is what?
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communication
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How is MC like competition and how is it like a monopoly?
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Its like competition b/c firms compete and there is free entry/exit. Its like monopolies b/c both have downward sloping demand curves which=deadweight loss and less efficiency.
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