Imperfect Competition Overview

Choose a study mode

Play Quiz
Study Flashcards
Spaced Repetition
Chat to Lesson

Podcast

Play an AI-generated podcast conversation about this lesson

Questions and Answers

What is the total revenue when selling 10 books at a price of $10 each?

  • $200
  • $50
  • $100
  • $150 (correct)

What does the formula for profit indicate when average total cost (ATC) equals price (P)?

  • Total revenue exceeds total costs.
  • Profit is maximized.
  • Profit equals zero. (correct)
  • There is a loss.

If the average total cost (ATC) is $20 and the price is also $20, what is the profit for selling 10 units?

  • $0 (correct)
  • $10
  • $200
  • $50

Given that quantity (Q) is 10 and the total cost (TC) is equal to $200, what is the average total cost (ATC) per unit?

<p>$20 (A)</p> Signup and view all the answers

How would a change in the selling price from $10 to $15 impact total revenue when selling 10 books?

<p>Total revenue would increase to $200. (D)</p> Signup and view all the answers

How does monopolistic competition differ from perfect competition?

<p>Monopolistic competition includes product differentiation. (A)</p> Signup and view all the answers

What is a shared characteristic of both monopolistic competition and perfect competition?

<p>Freedom of entry and exit. (C)</p> Signup and view all the answers

Which of the following statements is true regarding monopolistic competition?

<p>It does not consider the output levels of competitors. (B)</p> Signup and view all the answers

In monopolistic competition, product differentiation is primarily used to:

<p>Create a competitive advantage over similar products. (C)</p> Signup and view all the answers

Which of the following best describes firms in a monopolistic competition market?

<p>There is a large number of firms producing unique products. (A)</p> Signup and view all the answers

What is a significant advantage of monopolistic competition over perfect competition?

<p>Increased product variety available to consumers. (A)</p> Signup and view all the answers

Which of the following is NOT a characteristic of monopolistic competition?

<p>Product homogeneity. (B)</p> Signup and view all the answers

What factor most influences price setting in monopolistic competition?

<p>Market demand for differentiated products. (C)</p> Signup and view all the answers

What characterizes monopolistic competition?

<p>It consists of many small firms. (C)</p> Signup and view all the answers

What is an example of an industry that typically features oligopoly?

<p>Airlines (D)</p> Signup and view all the answers

Which of the following best describes product differentiation?

<p>Firms create unique products and set their own prices. (B)</p> Signup and view all the answers

What do firms engage in to attract customers in imperfect competition?

<p>Non-price competition (D)</p> Signup and view all the answers

What is indicated by a high level of industrial concentration?

<p>A few firms hold a significant share of the market. (C)</p> Signup and view all the answers

In which market structure do firms set their own prices?

<p>Monopolistic competition (B)</p> Signup and view all the answers

Non-price competition can involve which of the following?

<p>Advertising and product quality (A)</p> Signup and view all the answers

Imperfect competition can be defined as:

<p>A market structure with a few firms having significant market power. (B)</p> Signup and view all the answers

Which of these industries is NOT typically associated with monopolistic competition?

<p>Airlines (B)</p> Signup and view all the answers

What happens when market demand shifts in an imperfectly competitive market?

<p>Firms adjust their output levels. (D)</p> Signup and view all the answers

What is the shape of the demand curve in a monopolistic market?

<p>Downward sloping (D)</p> Signup and view all the answers

In a monopolistic market, profit is maximized where marginal revenue equals what?

<p>Marginal cost (A)</p> Signup and view all the answers

What happens to firm profits in the short run if new firms enter a monopolistic market?

<p>Profits decrease due to increased competition (C)</p> Signup and view all the answers

What does excess capacity in a monopolistic market imply about production levels?

<p>Firms operate below their maximum output (C)</p> Signup and view all the answers

In the long run, what happens to demand in a monopolistic market as more firms enter?

<p>Demand decreases (D)</p> Signup and view all the answers

At what output level does marginal cost equal average total cost in a monopolistic market?

<p>At the break-even point (C)</p> Signup and view all the answers

If the average total cost (ATC) touches the demand curve at a certain quantity, what does this indicate?

<p>Normal profit (C)</p> Signup and view all the answers

What characterizes firm entry into a monopolistic market in the long run?

<p>Decrease in economic profit (B)</p> Signup and view all the answers

What do monopolistic firms aim to achieve by differentiating their products?

<p>Increase market share (A)</p> Signup and view all the answers

Which condition must a monopolistic firm meet to maximize profit?

<p>Price must exceed average total cost (C)</p> Signup and view all the answers

What is the result of a downward sloping demand curve for monopolistic firms?

<p>Firms must lower prices to sell more (B)</p> Signup and view all the answers

In a monopolistic market, how does the long-run equilibrium differ from perfect competition?

<p>Firms earn zero economic profit (A)</p> Signup and view all the answers

What is a key feature of monopolistic competition regarding product differentiation?

<p>Products are considered close substitutes (B)</p> Signup and view all the answers

Under what condition is a monopolistically competitive firm most likely to expand its production?

<p>When it can increase product differentiation (C)</p> Signup and view all the answers

Flashcards

Oligopoly

A market structure where a few large firms dominate the industry.

Monopolistic Competition

A market structure with many small firms, where each firm sells slightly differentiated products.

Monopoly

A market structure with a single seller who has complete control over the price and quantity.

Imperfect Competition

A market structure that falls between perfectly competitive markets and monopolies.

Signup and view all the flashcards

Strategic Behaviour

The strategies firms use to compete with each other in a market.

Signup and view all the flashcards

Industrial Concentration

A measure of the concentration of market power among firms in an industry.

Signup and view all the flashcards

Market Power

The ability of a firm to set its own price above marginal cost.

Signup and view all the flashcards

Product Differentiation

Firms differentiate their products to attract customers in an imperfectly competitive market.

Signup and view all the flashcards

Non-Price Competition

Firms compete using methods other than lowering prices, like advertising or product quality.

Signup and view all the flashcards

Entry Barriers

The barriers that make it difficult for new firms to enter a market.

Signup and view all the flashcards

Freedom of Entry & Exit

The ability of firms to enter or exit a market freely. This is a characteristic of both perfect competition and monopolistic competition.

Signup and view all the flashcards

Interdependence

When firms in a market take into account the actions of other firms. In an oligopoly, firms are aware of each other and may adjust their strategies accordingly.

Signup and view all the flashcards

Market Output

The total output of all firms in a market. In an oligopoly, the output of each firm is significant, and their combined output affects the market price.

Signup and view all the flashcards

Profit Equation

The difference between the price (P) and the average total cost (ATC) per unit multiplied by the quantity (Q) sold. It represents the total profit earned by a business.

Signup and view all the flashcards

Total Revenue

The total revenue generated by a firm from selling its products. It is calculated by multiplying the price of the product by the quantity sold.

Signup and view all the flashcards

Marginal Cost

The cost of producing one additional unit of output. It is calculated as the change in total cost divided by the change in quantity.

Signup and view all the flashcards

Average Total Cost

The average cost of producing each unit of output. It is calculated by dividing total cost by the total quantity produced.

Signup and view all the flashcards

Total Cost

The cost of producing a good or service, including both fixed costs (costs that don't change with output, like rent) and variable costs (costs that change with output, like raw materials).

Signup and view all the flashcards

Marginal Cost (MC)

The cost of producing one more unit of output.

Signup and view all the flashcards

Marginal Revenue (MR)

The additional revenue generated by selling one more unit of output.

Signup and view all the flashcards

Profit Maximizing Point

The point where a firm maximizes its profits. In the short run, this occurs where marginal cost (MC) equals marginal revenue (MR).

Signup and view all the flashcards

Profit

The difference between the price of a good and its average total cost (ATC).

Signup and view all the flashcards

Downward Sloping Demand Curve

A downward-sloping demand curve faced by a monopolistically competitive firm. It reflects the firm's ability to set its own price, but within limitations.

Signup and view all the flashcards

Zero Economic Profit in Long Run

The long-run situation in monopolistic competition where firms earn zero economic profit. This is because entry and exit of firms drive the price down to equal ATC.

Signup and view all the flashcards

Excess Capacity

The situation in which firms are operating below capacity in the long run. This is because of competition and product differentiation.

Signup and view all the flashcards

Study Notes

Imperfect Competition

  • Imperfect competition falls between perfect competition and monopolies
  • Monopolistic Competition: Many small firms, e.g., restaurants, hair salons
  • Oligopoly: A few large firms, e.g., airlines
  • Industrial Concentration: Measures market power distribution among firms; a few firms control a large share of the market.
  • Product Differentiation: Firms offer unique products; firms can adjust their prices
  • Firms adjust output based on demand shifts
  • Firms need to stand out from the competition with quality and advertising

Similarities Between Monopolistic and Perfect Competition

  • Freedom of entry and exit
  • Do not consider the outputs of other firms

Monopolistic Competition-Graphically

  • Works like a monopoly but demand is downward sloping (DC)
  • Short Run: Produce where marginal cost equals marginal revenue
  • Long Run: Firms may earn 0 profit; excess capacity; demand shifts to touch the average total cost curve
  • Note: The provided image shows a graph illustrating the profit-maximizing point (where MR=MC) and calculates the profit based on price (P) and average total cost (ATC).

Studying That Suits You

Use AI to generate personalized quizzes and flashcards to suit your learning preferences.

Quiz Team

Related Documents

Econ 208 Final Exam Crash Course PDF

More Like This

Monopolistic Competition and Imperfect Markets
10 questions

Monopolistic Competition and Imperfect Markets

JoyousComet4753 avatar
JoyousComet4753
Imperfect Competition Overview
7 questions

Imperfect Competition Overview

EffortlessGyrolite7402 avatar
EffortlessGyrolite7402
Concorrenza Imperfetta e Monopolistica
48 questions

Concorrenza Imperfetta e Monopolistica

BelievableCantor avatar
BelievableCantor
10.1
10 questions

10.1

MeritoriousOrangeTree7437 avatar
MeritoriousOrangeTree7437
Use Quizgecko on...
Browser
Open
Browser
Browser