ECON 251, FINAL, PURDUE EXAM QUESTIONS AND
ANSWERS 100% PASS
Monopolistic Competition characteristics - ANSWER 1. Many firms
2. Products are differentiated
- types of differentiation
a. price
b.quality
c. marketing- advertising or packaging
Monopolistic Competition - ANSWER -MR is till twice as steep at Price
-Demand of individual firms is not elastic
-Df does not equal the demand of the market
-NO allocative efficiency
- its legal bc variety has value
Long Run of Monopolistic Competition - ANSWER Profit is > 0 so:
-the best alternative is worse
-firms enter
-so there's a decrease in Price and profit for everyone until profit= 0
, efficient scale - ANSWER The amount of Q that will satisfy production efficiency.
Oligopoly Characteristics - ANSWER 1. small number of firms
2. may or may not have differentiated products
3. significant barriers to entry
4. actions of firms are interdependent
Game Theory - ANSWER 3 elements
-players
-strategies
-pay offs-> always represented in a payoff matrix
Dominant Strategy - ANSWER A single strategy that always generates the highest payoff
regardless of the competitors strategy.
dominant strategy equilibrium= (low, low)
cartel - ANSWER group of firms in an oligopoly acting like a monopolist.- collusion results
from punishment
ex.) I'll charge high prices if you do too
ANSWERS 100% PASS
Monopolistic Competition characteristics - ANSWER 1. Many firms
2. Products are differentiated
- types of differentiation
a. price
b.quality
c. marketing- advertising or packaging
Monopolistic Competition - ANSWER -MR is till twice as steep at Price
-Demand of individual firms is not elastic
-Df does not equal the demand of the market
-NO allocative efficiency
- its legal bc variety has value
Long Run of Monopolistic Competition - ANSWER Profit is > 0 so:
-the best alternative is worse
-firms enter
-so there's a decrease in Price and profit for everyone until profit= 0
, efficient scale - ANSWER The amount of Q that will satisfy production efficiency.
Oligopoly Characteristics - ANSWER 1. small number of firms
2. may or may not have differentiated products
3. significant barriers to entry
4. actions of firms are interdependent
Game Theory - ANSWER 3 elements
-players
-strategies
-pay offs-> always represented in a payoff matrix
Dominant Strategy - ANSWER A single strategy that always generates the highest payoff
regardless of the competitors strategy.
dominant strategy equilibrium= (low, low)
cartel - ANSWER group of firms in an oligopoly acting like a monopolist.- collusion results
from punishment
ex.) I'll charge high prices if you do too
