ECON 2102 Chapter 8 Exam Questions and Answers| New Update with 100% Correct Answers
if the average cost of production declines as the number of units produced increases, then the
production process exhibits ___ economies of scale
price setter a firm with at least some latitude to set its own price. The competitive firm
> Ex. The holder of a copyright
price taker a firm with no influence over the price of its product
pure monopoly the only supplier of a unique product with no close substitutes
> Ex. producer of Magic trading cards
monopolistic competition an industry structure in which a large number of firms produce
slightly differentiated products that are reasonably close substitutes for one another
> Ex. local gasoline retailing
> not perfect competition
monopolistically competitive firms can't expect to earn positive economic profits in the long run
because ___ entry and exit of firms is similar to perfect competition, since entry and exit
from the market ensures the invisible hand is in effect since there isn't a complete monopoly
an issue monopolisticially competitive firms face is how to differentiate their products from
those of existing rivals.
, > Should a product be made to resemble a rival's product, be different from it, or something in
between?
oligopoly an industry structure in which a small number of large firms produce products that
are either close or perfect substitutes
in the long run, oligopolists ___ earn a positive economic profit. might or might not
whereas the perfectly competitive firm faces a ___ demand curve for its product, the
imperfectly competitive firm faces a ___ demand curve. > perfectly elastic
> downward-sloping
In the perfectly competitive industry, the supply and demand curves intersect to ___
determine an equilibrium market price
market power a firm's ability to raise the price of a good without losing all its sales
5 sources of market power: 1.) EXCLUSIVE CONTROL OVER IMPORTANT INPUTS
2.) PATENTS AND COPYRIGHTS
3.) GOVERNMENT LICENSES OR FRANCHISES
4.) ECONOMIES OF SCALE AND NATURAL MONOPOLIES
5.) NETWORK ECONOMIES
EXCLUSIVE CONTROL OVER IMPORTANT INPUTS If a single firm controls an input essential to
the production of a given product, that firm will have market power. For example. to the extent
that some US. tenants are willing to pay a premium for office space in the country's tallest
building, One World Trade Center, the owner of that building has market power.
if the average cost of production declines as the number of units produced increases, then the
production process exhibits ___ economies of scale
price setter a firm with at least some latitude to set its own price. The competitive firm
> Ex. The holder of a copyright
price taker a firm with no influence over the price of its product
pure monopoly the only supplier of a unique product with no close substitutes
> Ex. producer of Magic trading cards
monopolistic competition an industry structure in which a large number of firms produce
slightly differentiated products that are reasonably close substitutes for one another
> Ex. local gasoline retailing
> not perfect competition
monopolistically competitive firms can't expect to earn positive economic profits in the long run
because ___ entry and exit of firms is similar to perfect competition, since entry and exit
from the market ensures the invisible hand is in effect since there isn't a complete monopoly
an issue monopolisticially competitive firms face is how to differentiate their products from
those of existing rivals.
, > Should a product be made to resemble a rival's product, be different from it, or something in
between?
oligopoly an industry structure in which a small number of large firms produce products that
are either close or perfect substitutes
in the long run, oligopolists ___ earn a positive economic profit. might or might not
whereas the perfectly competitive firm faces a ___ demand curve for its product, the
imperfectly competitive firm faces a ___ demand curve. > perfectly elastic
> downward-sloping
In the perfectly competitive industry, the supply and demand curves intersect to ___
determine an equilibrium market price
market power a firm's ability to raise the price of a good without losing all its sales
5 sources of market power: 1.) EXCLUSIVE CONTROL OVER IMPORTANT INPUTS
2.) PATENTS AND COPYRIGHTS
3.) GOVERNMENT LICENSES OR FRANCHISES
4.) ECONOMIES OF SCALE AND NATURAL MONOPOLIES
5.) NETWORK ECONOMIES
EXCLUSIVE CONTROL OVER IMPORTANT INPUTS If a single firm controls an input essential to
the production of a given product, that firm will have market power. For example. to the extent
that some US. tenants are willing to pay a premium for office space in the country's tallest
building, One World Trade Center, the owner of that building has market power.
