Define the following terms:
Cartel:
Collusion:
Mutually Interdependent Firms:
Oligopoly:
Predatory Pricing:
Product Differentiation:
Mutual Interdependence:
1. Using complete sentences, write a brief paragraph explaining the differences between oligopolies in a contestable market and oligopolies a cartel market.
2. Why do firms in a competitive market earn zero profits in the long run?
3. What factors are necessary for a monopoly to exist?
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. In what ways is monopolistic competition like a monopoly? Give an example.
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.
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?