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Externalities, Public Goods, Imperfect Information, and Soci

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1. Which of the following industries would you classify as an oligopoly? Which would you classify as monopolistically competitive? Explain your answer. If you are not sure, what information do you need to know to decide?
a. Athletic shoes
b. Restaurants
c. Watches
d. Aircraft
e. Ice cream

1) How does a firm in an oligopoly market maximize profits in the short term and the long term?
When answering these questions, include MC=MR where it applies.

2) How does a firm in a monopolistic competition market maximize profits in the long term and the short term?
When answering these questions, include MC=MR where it applies.

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Solution Summary

The solution classifies several industries into the different categories.

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1.
(a) Athletic Shoes: This is an oligopoly. There are only a handful of athletic shoe providers - Nike, Adidas, Puma, Reebok and a few others. You can perhaps count the number of companies that provide athletic shoes. Thus this is an oligopoly. The actions of one of these companies may impact what the other company does or does not do.

(b) Restaurants: There are literally millions of restaurants and restaurant chains in the US and the world. However, each one of them offers differentiated products. Thus, this is a ...

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