Explore BrainMass
Share

Oligopoly, Monopoly, Competitive Markets and Firm Costs

This content was STOLEN from BrainMass.com - View the original, and get the already-completed solution here!

Please explain these questions:

Is it false that the defining characteristic of oligopoly is that each firm is mutually interdependent?
Is it true that a price discriminating monopolist charges the same price to everyone? (Be sure to point out that a price discriminating monopolist must be the only seller in the market.).
Is it false that most consumers would prefer markets that are purely competitive?
Is it true that a firm should shut down in the short run if price is less than average fixed costs?

© BrainMass Inc. brainmass.com October 25, 2018, 7:36 am ad1c9bdddf
https://brainmass.com/economics/monopolies/oligopoly-monopoly-competitive-markets-firm-costs-508534

Solution Preview

Is it false that the defining characteristic of oligopoly is that each firm is mutually interdependent?

NO, this is true. An oligopoly exists because of mutual interdependence in the given industry. There are a handful of sellers that can dominate the market. Pricing changes also follow that of the same structure -- when an oligopoly seller drops a price, the other sellers will follow suit and meet the price drop but when the oligopoly seller increases its price, the other sellers in the oligopoly will hold their prices constant and will not raise their prices.

Is it true that a price discriminating monopolist charges the same price to everyone? (Be sure to point out that a price discriminating monopolist must be the only seller in the ...

Solution Summary

This solution provides complete, clear explanations for each statement listed. I explain why each economic statement is true or false. All questions are thoroughly answered.

$2.19
See Also This Related BrainMass Solution

Which market structure is more applicable for the market for building commercial aircrafts, when there are two major manufacturers of the commercial airplanes and little possibility of entry by new firms

1. Based on your reading, which market structure is more applicable for the market for building commercial aircrafts, when there are two major manufacturers of the commercial airplanes and little possibility of entry by new firms:
a. perfect competition
b. monopoly
c. oligopoly
d. monopolistic competition

2. Based on your reading, which market structure is most applicable for the market for soybeans? This product is homogeneous and produced by many different farmers. There is free entry, and the product is traded in a commodities market.
a. perfect competition
b. monopoly
c. oligopoly
d. monopolistic competition

3. Based on your reading, which market structure is most applicable for the market for commercial diamonds in the 1970s? Mining, polishing, and distributing diamonds is controlled by a single company, and that company sets the quantity and price for majority of diamonds available in the market.
a. perfect competition
b. monopoly
c. oligopoly
d. monopolistic competition

4. Based on your reading, which market structure is most applicable for the domestic market for heating oil when there are many resellers of heating oil and it is a homogeneous product?
a. perfect competition
b. monopoly
c. oligopoly
d. monopolistic competition

5. Suppose an identical goods is sold in the three markets that are isolated from each other. In Market A, there are many sellers of the goods. In Market B, there are two sellers; these sellers are not allowed to communicate about there price and quantity until they actually offer the good for sale. In Market C, there is only one seller. All of the sellers have identical cost schedules. From highest to lowest, order the markets in term of the quantity of good that they sell in the market.
a. Market B, Market A, Market C
b. Market A, Market C, Market B
c. Market C, Market B, Market A
d. Market A, Market B, Market C

6. Based on your reading, which market structure is most applicable for the international market for crude oil? There are several producers of oil, which is a fairy homogeneous product. However, there is no possibility of entry and several producers have formed a cartel, the Organization of Petroleum Exporting Counties (OPEC).
a. perfect competition
b. monopoly
c. oligopoly
d. monopolistic competition

7. Based on your reading, which market structure is most applicable for the market for over-the-counter painkillers? There are many firms in this industry, and the products are differentiated.
a. perfect competition
b. monopoly
c. oligopoly
d. monopolistic competition

8. Which of the following reflect the way a monopoly firm chooses a price and outputs?
a. price equal marginal cost
b. marginal revenue equal marginal cost
c. the greatest difference between marginal revenue and marginal cost
d. minimize average cost

9. Which of the following options best describes market structures from the lowest to the highest degree of market power?
a. perfect competition, monopolistic competition, oligopoly, monopoly
b. oligopoly, monopoly, monopolistic competition, perfect competition
c. monopoly, perfect competition, oligopoly, monopolistic competition
d. monopolistic competition, oligopoly, monopoly, perfect competition

10. Consider a perfectly competitive firm in the short run that is making a profit while producing 150 units of outputs at a marginal cost of $10 and a total revenue of $3,000. Which of the following best description the firm's actions or options?
a.. the firm is maximized profits
b. the firm could increase profits by decrease outputs
c. the firm could increase profit by in creasing outputs
d. the firm should shut down production

11. Based on your reading, which market structure is most applicable for the market generic aspirin which is a homogeneous product, made by many different firms.
a. perfect competition
b. monopoly
c. oligopoly
d. monopolistic competition

12. The demand curve of the a perfectly competitive firm could be more or less elastic than the demand curve of a firm with monopoly power depending on the level of output produced.
a. True
b. False

13. This of the following is most likely to occure. If the price in a perfectly competitive market is above a firm's average variable cost, but the below its average cost?
a. the firm will continue operating in the short run, but it will exit the industry in the long run
b. the firm should shut down immediately and exit the industry
c. the firm should continue operating in the short run and the long run.
d. The firm should shut down now and reopen when condition change.

14. A cable company has determined that the marginal revenue from an additional subscriber is $15 and the marginal cost of providing cable service is $5. Based on this information, what should the company do?
a. Increase the quantity of cable services provided
b. Decrease the quantity of the cable services provided
c. Keep the quantity of cable services provided constant

15. Suppose a perfectly competitive firm experiences an increase in wage paid to labor in the short run. In the short run, if the firm follows the profit-maximizing rule, which of the following may you conclude?
a. that variable, total, and marginal cost rise; output falls and profits fall
b. that variable and total cost rise, output is unchanged and profit falls
c. that variable and total cost rise, output and profits are unchanged
d. that variable, total, and marginal cost rise, output falls, and profits are unchanged.

View Full Posting Details