Subpart (a):
The market structure.
Subpart (a):
Explanation of Solution
A hometown supermarket is an oligopoly market because supermarkets are few in the economic market and the size of the market makes it difficult to make a new entry and one which is non price competition. This is because there is much competition in the market as they compete for market share and there is no collusion and some of the areas behave like a monopolistic market.
Concept introduction:
Pure competition:
Pure
Oligopoly: Oligopoly refers to the market structure which features few sellers and more buyers. Oligopoly firms produce homogenous goods and are competing with themselves, but there is no price competition. There is no easy entry in to the market due to huge investment. Information about the market is unavailable.
Subpart (b):
The market structure.
Subpart (b):
Explanation of Solution
In a domestic production market, the steel industry is an oligopoly because there are a small number of firms and the products are standardized. The size makes it difficult for new entries and there is non- price competition and no collusion.
Concept introduction:
Pure competition: Perfect competition refers to the market structure which features more number of sellers and buyers in the market and the firm can sell homogenous products.
Pure monopoly: Monopoly refers to the market structure with the features of a single seller and more buyers. Firms have full control over the market. Price is fixed by the monopoly producer. There is a restriction for entry of the firm. Hence, there are no substitute goods available in the market.
Monopolistic competition: Monopolistic competition refers to the market structure with the feature of more firms producing differentiated goods. These goods are called substitute goods: but they are not perfect substitutes. There is no restriction to enter the business. Firms are price makers.
Oligopoly: Oligopoly refers to the market structure which features few sellers and more buyers. Oligopoly firms produce homogenous goods and are competing with themselves, but there is no price competition. There is no easy entry in to the market due to huge investment. Information about the market is unavailable.
Subpart (c):
The market structure.
Subpart (c):
Explanation of Solution
Wheat farms are pure competition in the market because there are a number of similar farms and the products are standardized. Also, there is no control over the price and no non-price competition. Since the cost of acquiring land from a present proprietor is large, entry is difficult.
Concept introduction:
Pure competition: Perfect competition refers to the market structure which features more number of sellers and buyers in the market and the firm can sell homogenous products.
Pure monopoly: Monopoly refers to the market structure with the features of a single seller and more buyers. Firms have full control over the market. Price is fixed by the monopoly producer. There is a restriction for entry of the firm. Hence, there are no substitute goods available in the market.
Monopolistic competition: Monopolistic competition refers to the market structure with the feature of more firms producing differentiated goods. These goods are called substitute goods: but they are not perfect substitutes. There is no restriction to enter the business. Firms are price makers.
Oligopoly: Oligopoly refers to the market structure which features few sellers and more buyers. Oligopoly firms produce homogenous goods and are competing with themselves, but there is no price competition. There is no easy entry in to the market due to huge investment. Information about the market is unavailable.
Subpart (d):
The market structure.
Subpart (d):
Explanation of Solution
Commercial banks are in a monopolistic competition because there are many similar banks, the services are differentiated, and there is price control mostly in interest. Entry in the market is easy and there is much advertisement. Not every bank fits in the description of the monopolistic market; some smaller places act as a monopoly or an oligopoly.
Concept introduction:
Pure competition: Perfect competition refers to the market structure which features more number of sellers and buyers in the market and the firm can sell homogenous products.
Pure monopoly: Monopoly refers to the market structure with the features of a single seller and more buyers. Firms have full control over the market. Price is fixed by the monopoly producer. There is a restriction for entry of the firm. Hence, there are no substitute goods available in the market.
Monopolistic competition: Monopolistic competition refers to the market structure with the feature of more firms producing differentiated goods. These goods are called substitute goods: but they are not perfect substitutes. There is no restriction to enter the business. Firms are price makers.
Oligopoly: Oligopoly refers to the market structure which features few sellers and more buyers. Oligopoly firms produce homogenous goods and are competing with themselves, but there is no price competition. There is no easy entry in to the market due to huge investment. Information about the market is unavailable.
Subpart (e):
The market structure.
Subpart (e):
Explanation of Solution
Automobile industries are an oligopoly because there are three big automakers in a market, the products are differentiated, and their size makes it difficult for new entries. There is also a lot of non-price competition; it does not appear to have no collusion and there is little price competition. Thus, imports make the industry more competitive and reduce the market power of US automakers.
Concept introduction:
Pure competition: Perfect competition refers to the market structure which features more number of sellers and buyers in the market and the firm can sell homogenous products.
Pure monopoly: Monopoly refers to the market structure with the features of a single seller and more buyers. Firms have full control over the market. Price is fixed by the monopoly producer. There is a restriction for entry of the firm. Hence, there are no substitute goods available in the market.
Monopolistic competition: Monopolistic competition refers to the market structure with the feature of more firms producing differentiated goods. These goods are called substitute goods: but they are not perfect substitutes. There is no restriction to enter the business. Firms are price makers.
Oligopoly: Oligopoly refers to the market structure which features few sellers and more buyers. Oligopoly firms produce homogenous goods and are competing with themselves, but there is no price competition. There is no easy entry in to the market due to huge investment. Information about the market is unavailable.
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Chapter 10 Solutions
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- 3. The following graph summarizes the demand and costs for a firm that operates in a monopolistically competitive market. (LOI, LO3, LOS) $220 210 200 190 180 170 160 150 140 130 120 110 100 90 80 70 60 50 40 30 20 10 0 MR 8 9 10 11 12 13 14 15 16 a. What is the firm's optimal output? b. What is the firm's optimal price? c. What are the firm's maximum profits? d. What adjustments should the manager be anticipating? ATC 22 23 24 25 Quantityarrow_forwardIn the graph for Nike shoes, assume that Nike is selling their shoes in a monopolistically competitive market. At the profit maximizing quantity, the TC of Nike is 100. What is Nike's profit at this quantity? O 150 O 140 0 50 05arrow_forwardRawlding is a manufacturer in the oligopolistically competitive market for footballs. Two other manufacturers, Spaldon and Wilke, compete with Rawlding for football consumers. Rawlding faces the demand curve for footballs depicted on the graph. Initially, Rawlding charges $30 per football, producing and selling 7 million footballs per year. PRICE (Dollars per ball) 36 35 34 33 32 31 30 29 28 27 26 O 7 8 FOOTBALLS (Millions of balls) 9 10 G As an oligopolist, Rawlding is a price maker. If Rawlding raises the price of its football from $30 to $32 per ball, the quantity of Rawlding footballs demanded by million footballs per year. If Rawlding reduces the price of its football from $30 to $28 per ball, the quantity of by million footballs per year. (Hint: Click on the points on the graph to see their coordinates.) footballs demanded If Rawlding raises the price of its football above $30, the kinked demand curve model suggests that Spaldon and Wilke will respond by The portion of Rawlding's…arrow_forward
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- Assuming that the monopolistic competitor faces the demand and costs depicted below and finds the profit maximizing level of output, what will be the firm's profit? 36 32 28 24 20 16 12 8 4 O O 1 O MC1 ATC₁ FAVC₁ Select one: O a. $8 b. $-32 c. $-64 d. $12 x Incorrect. The profit maximizing output is 4 units where Marginal cost equals marginal revenue. At that output, use the demand curve to find the price and calculate total revenue. At that output, use the average cost curve to find the average cost and calculate total cost. Then calculate profit = total revenue - total cost. MR1 D₁ 2 3 4 5 6 7 8 9arrow_forwardWhat did Harvard economist Edward Chamberlin say about the observation that a monopolistically competitive firm's average cost of production exceeds its minimum average total cost? Select one: O a. Chamberlin argued that this belief is incorrect. In his view, monopolistically competitive firms do not produce at a cost above their minimum average total costs. O b. Chamberlin argued that these higher costs represent the wastefulness of this market structure. O c. In Chamberlin's view, this is evidence that monopolistic competition uses society's resources inefficiently and in a fashion that merits government intervention. O d. According to Chamberlin, this cost difference represents the value consumers place on variety and having more choice.arrow_forwardpenumy.edu LA0 u ten Que Complio St QUESTION 2Y MC 14 13 ATC MR 登 S8R Shce tm the above e is perng monopeicaly competve indutry in the long n we an expect o see Othe lypical fm's econom prolts expand as preduction hecomes more efficient Ohe lypal em praducng theimu po on ATC curve O mar mseterng the ndty un ecunomie profs ah empand share of the tet QUESTION 23 Suppese an indstry has utal sales f 25 millon per y The teo larpest fems have sales of $6 millen each the id largest fem has sales of 2 miion, and the fourth largest f has sales of S1 millon The rm conceation ratio for thin nduty O 30 percent O 1 percent O25 percent O 60 percent QUESTION 24 Suppose there are four frm in an industry The market shares of the four fems are 5 percent, 20 percent 35 percert, and 40 percent The Hurfindahi Hischan index tor that industry O 100 O6 650 O 1.250 O 3250 Chck Sane and Sulmit to ae and aulimit. Click Sate All Anaue to se all aencers Sa Aarrow_forward
- Table 18-14 Suppose that two oil companies-BP and Exxon-own adjacent natural gas fields. The profits that each firm earus depends on both the member of wells it drills and the number of wells drilled by the other firm. The table below lists each firm's individual profits: Exxon Drill one well Drill two wells BP Drill one well BP Drill two wells Exxon's profit $10 million BP's profit $10 million Exxon's profit $6 million BP's profit $12 million Exxon's profit $12 million BP's profit $6 million Exxon's profit $8 million. BP's profit $8 million Refer to Table 18-14. Does BP have a dominant strategy? If so, describe it. For the toolbar, press ALT+F10 (PC) or ALT+FN+F10 (Mac) BIUS Paragraph Arial 5 田田田园 10pt 89. M XX, 833 >>() ⒸO HE [+ V A AV ✓ Z X T 94 ΩΘΙ *** 68.88arrow_forwardQuestion 2 AnimoSpace Support ? Given the perfect competitor firm's supply curve below, what is the shutdown price? P(cost) MC AC 80 AVE 70 60 50 40 30 20 (10,10) 10 10 20 30 40 50 60 70 80 90 100 110 12 Qty Break-even quantity: Shutdown price: O 50 O 70 O 35 IS O 80 O 5 a Question 3 Which of these market structures is not correctly described? Monopolistic Nliaonoly Mononolhe o searcharrow_forwardThe graph below shows a duopolistic market. The firms in this market produce and sell identical products. The graph below shows the market demand, a corresponding marginal revenue curve for the product, and an identical marginal cost curve for each firm. Assume both firms have the goal of maximising economic profit. If the two firms were to collude, what would be the total economic profit made by each firm? O O O $24 $6 $16 $8 Price ($) 10 9 8 7 $0 6 5 4 3 2 1 0 0 Insufficient information to determine economic profit of each firm. 1 2 3 4 MR 5 6 7 8 9 MC D 10 Quantityarrow_forward
Principles of Economics 2eEconomicsISBN:9781947172364Author:Steven A. Greenlaw; David ShapiroPublisher:OpenStax