Scenario: A monopolist can sell 14,000 units at a price of $100perunit Lowering

Question

Scenario: A monopolist can sell 14,000 units at a price of $100perunit Lowering priceby $1 raises the quantity -10. How do oligopolies differ from all oth industry suuAWes? demanded by 500 units. 11. Whatare the two conictngincentives ofoligopcly (o the same as 10 above). 12. Be able to define oligopcly Question: Based onthe scenario abome, what wauld the additional revermie fromlowering the price would be 28. Is it ue that monopoly and mccopclistic competition are the same? If not, how dothey differ? In what ways are they the same if they arenotidentical? 13. Know that in the game playedin class or would havebeen playedif not playedin you section), here was a Nash equilibrium at the place wbere both teams charged alow price. 14. Know which firms are price takers and which areprice makers. Exhibit 24-1 15. Is it ue that if oligopoly fims are competing, theincentive for each fimis always to undarcut the other firm and charge a lower priceno marer what the priceis. 16. Isis uueat oligopoly is essentiallyidenucal to mora,polistie cumpeuc n bul with less firms in the industry. 17. Know whenadvertisngis more andless effective (what types of markets) 18. Kow whenP-MR and when PMR. Recall that firms choose output where MC-MR. 19 How will ctherfirms act ifPC firms are making an ecomic profit (enter, exit or donothing) 20. Duringwhatperiod oftime can ALL fimsmake a profit? 2 What does the following equaticm eu? (P-ATC) Q Osentity 29. Refer to Exhitit 24-1, Identifythe deadweight loss of the profit maximizingmonapoly 22. Whatis the difference beween hmognous ourt and product differentiation, if any? 23. Is it true that a firm earns zero economic profit, given the condition that P = AVC 24. ATe there a certain number of tirms for an industryto be PC, MC, Oligopoly? 25 Whatis "price of vaiety" (cptually, no aumber? 26. Does P = MR for monopoly? 30 Are there more firmsin a monopolistically competitive maket thanunder perfect competton? 31. Are gas stations are good"real world examples ofmoncpolistic compettion 32. Is it true that one characteristic that monapoly andmomopolistic campetition share is that they both represnt price making fims. 33. What causes economic profitto be "compctod anay 34. If a firmwereto engage in effectuve pice discrimination it would charge more to those with a greater clasticity and less to those with a smaller elasticity (again this refers to price clasticity of demand). Is this ueWhy 35 The demand for anv resource (or factor ofproduction is the marginal rev ue product fo that 1 esource.

Explanation / Answer

First question is answered below.

Oligopolies are market structures consisting of a few large firms selling identical products to a large number of buyers. These firms operate for profit maximization by setting MR = MC and charging very high prices to customers.

Since the number of producers is less, there are very strong chances of these firms to either collude or indulge in price / quantity wars. However, collusion is the most likely outcome. E.g. OPEC is a collusion of the largest oil producing companies in the world.

This market structure has very high entry barriers and require high investment costs to operate.

This market is different than other firms in the sense that the monopolist has single seller as compared to few large sellers in oligopoly ; and perfectly competitive firms operate for social welfare instead of profit maximization and have a large number of sellers.

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