i have three questions of my microeconomic assignment

Principles of Microeconomics Problem Set 6 Due 3/8/16

1. In the long run, monopolistic competitors will typically make

a. Positive economic profits due to their market power.

b. Negative economic profits due to their high fixed costs.

c. Zero economic profit due to entry/exit.

d. Positive economic profit due to undersupply.

2. Which of the following markets is likely to be a good example of monopolistic competition?

a. Gas stations.

b. Books.

c. Electricity.

d. Answer

3. Two competing firms sell an identical product. They compete by choosing price. Is this Bertrand

or Cournot competition? Will the firms make positive profit? Why or why not?

4. Oligopoly markets will typically (but not always) feature

a. Lower price than monopoly markets.

b. Lower output than competitive markets.

c. Higher profit than competitive markets.

d. All of the above.

5. Hotelling competition is distinguished from Bertrand competition by

a. The inclusion of travel costs.

b. Competing on quantity instead of prices.

c. Allowing explicit agreements between firms.

d. Forcing firms to sell identical products.

6. Megacorp and Omniinc get together and agree to set their prices the monopoly price. What is

the name for this kind of arrangement? Why does the government object to it more than other

forms of oligopoly competition? Why might Megacorp want to stick with such a deal? Why

might it want to cheat on the deal?