1- Is an oligopolist more or less likely to engage in strategic decision making
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Question
1- Is an oligopolist more or less likely to engage in strategic decision making compared to a monopolistic competitor? <?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />
Neither an oligopolist nor a monopolistic competitor is likely to engage in strategic decision making because there are too many firms in both market types for them to make accurate predictions about all of the firms' actions.
Strategic decision making is the central characteristic of both oligopoly and monopolistic competition.
More. Strategic decision making is the central characteristic of oligopoly. Monopolistic competitors face too many competitors to price strategically.
Less. Strategic decision making is the central characteristic of monopolistic competition. Oligopolists face too many competitors to price strategically.
2- Best-selling horror, Duma Key by Stephen King, was sold in hardback for $28 when it was released on July 15, 2003. One year later, the publisher issued a soft-cover edition for $9.99. What accounts for the difference in price? (Note: The marginal cost of printing a book with a soft cover is not much less than the cost of a hardcover book.)
Declining costs of production.
Depreciation.
Price-discrimination.
Price-gouging
3- What three things must a firm be able to do to price discriminate?
Instructions: Select all that apply.
A) Identify groups with different elasticities.
b) Separate groups with different elasticities.
c) Limit the ability to resell the good among groups.
d) Accept the market price as given.
e) Limit sales to the group with the lowest elasticity
4- If a monopolistic competitor is able to restrict output, why doesn’t it earn economic profits?
a) The monopolistic competitor does not earn economic profits because firms’ products are identical.
b) The monopolistic competitor does not earn economic profits because of free entry into the market.
c) The monopolistic competitor does not earn economic profits because of high cost of government regulation of monopolies.
d) The monopolistic competitor does not earn economic profits because of the high fixed costs in these industries.
Explanation / Answer
More. Strategic decision making is the central characteristic of oligopoly. Monopolistic competitors face too many competitors to price strategically.
Price-gouging
A) Identify groups with different elasticities.
c) Limit the ability to resell the good among groups
b) Separate groups with different elasticities.
b) The monopolistic competitor does not earn economic profits because of free entry into the market.
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