Profit Maximizing Under Perfect Competition And Monopoly

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1.In markets that are contestable, how do dominant oligopoly firms typically behave?

like firms in monopolistic competitionas a cartellike perfectly competitive firmsas a monopoly

2.According to the kinked demand curve model in oligopoly markets, how does the elasticity of demand behave when prices change?

Demand is less responsive to price hikes than to price drops.Demand becomes perfectly elastic when prices rise and perfectly inelastic when prices fall.Demand elasticity remains unchanged regardless of price fluctuations.Demand is more sensitive to price increases than to price decreases.Demand elasticity varies unpredictably with price changes.

3.Under which scenario is a cartel most likely to be successful?

The copper industry, characterized by a limited number of producers and a uniform product.The fast-food sector, with many competitors but demand for fast food is relatively unresponsive to price changes.The coffee market, where the product is homogeneous but there are numerous growers involved.The car manufacturing industry, which has few manufacturers but products vary significantly.

4.What term describes an agreement between parties to set prices and output levels collectively?

5.What do we call an industry where only a few companies hold the majority of market power?

an industry engaged in collusionan industry formed by mergersa concentrated industryan industry with a natural monopolyan industry with many competitors

6.Which market structure consists of a small number of large companies, each capable of affecting the price in the market?

7.Which statement most accurately reflects the outcome in a market characterized by monopolistic competition?

The market is efficient in output quantity but inefficient since production costs exceed the lowest average total cost.The market achieves efficiency because free entry drives economic profits to zero over time.The market is inefficient because it produces less output than optimal and does so at a cost higher than the minimum average total cost.The market is inefficient due to insufficient output, yet the production occurs at the minimum average total cost.None of the above statements correctly describe the outcome.

8.In a monopolistically competitive market, how does a firm increase the quantity of goods it sells?

It offers a constant quantity of product no matter the price.It needs to increase the price to boost sales volume.It can sell unlimited units at the prevailing market price.It has to reduce the price to sell additional units.

9.How do firms in monopolistic competition gain a certain level of market power?

By offering products that are distinct from those of competitorsDue to obstacles preventing firms from leaving the marketSimply because of their large sizeAs a result of difficulties for new firms to enter the market