I need help with my Econ HW

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Assignment #12 Market Structures 2: Monopolistic Competition and Oligopoly

(10 Points)

Define the following terms:

Cartel: _______________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ Collusion: ____________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ Mutually Interdependent Firms: __________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ Oligopoly: ____________________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ Predatory Pricing: _____________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ Product Differentiation: _________________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________ Mutual Interdependence: _______________________________________________________________ _____________________________________________________________________________________ _____________________________________________________________________________________

Short Answer Questions:

1. Using complete sentences, write a brief paragraph explaining the differences between

oligopolies in a contestable market and oligopolies a cartel market.

______________________________________________________________________________

3. Why do firms in a competitive market earn zero profits in the long run? _____________

______________________________________________________________________________

4. Why do firms in a competitive industry have a perfectly elastic (horizontal) demand

curve?

______________________________________________________________________________

5. Explain why a perfectly competitive firm will still earn a positive accounting profit even

though they earn zero economic profit?

______________________________________________________________________________

6. What factors are necessary for a monopoly to exist?

______________________________________________________________________________

7. What is the key characteristic defining the monopolistic Competition market structure?

______________________________________________________________________________

8. In what way(s) is monopolistic competition like perfect competition? Give an example.

______________________________________________________________________________

S = MC

ATC

$60

$40

$30

$25

10 20 22

Market for iPods

9. In what way(s) is monopolistic competition like a monopoly? Give an example.

______________________________________________________________________________

5. Use the graph below to answer the following questions.

a. How many iPods would a perfectly competitive market produce? ________________

b. What price would the perfectly competitive market charge? ________________

c. How much profit would the perfectly competitive market make? ________________

d. How many iPods would a monopolistic market produce? ________________

e. What price would a monopolistic market charge? ________________

f. How much profit will the monopolistic market make? ________________