Monopolistic Competition and Oligopoly
Answer question numbers 1 and 2 from chapter 9, question number 5 from chapter 10 and question number 4 from chapter 11. Submit your answer in a Word document by the end of Saturday. Other questions will not be graded, but review them for the Final Exam.
Chapter 9: Pricing and Output Decisions: Monopolistic Competition and Oligopoly
Chapter 10: Special Pricing Practices
1. Compare and differentiate the 4 basic characteristics of monopolistic competitive markets and oligopoly markets (Refer to Table 9.1)
2. Provide your own real examples of monopolistic competitive and oligopoly markets, and explain how these firms are price makers.
3. How a monopolistic competitive firm determines the optimum output level? (Use Figure 9.1)
4. How much profit monopolistic competitive firms make in the short run and long run? (Fig. 9.1)
5. Explain how the Herfindahl-Hirschman Index measures market concentration and how it is used by the Department of Justice.
6. Why there are so many ways oligopoly firms can determine the optimum output level and optimum price?
7. What is the main point of the kinked Demand model?
8. Illustrate with real instances how firms in imperfect competitive markets compete with non-price actions
9. How can firms use marginal analysis to optimally decide the level of expenses to support their non-price actions?
10. Illustrate with a real example how markets evolve from non-competitive markets to more competitive markets
11. How the Structure-Conduct-Performance paradigm explains the competitive behavior of firms? Could you provide a real example of it?
12. How the ‘new’ theory of industrial organization explains the competitive behavior of firms? Could you provide a real example of it?
1. What is a cartel and what is its objective?
2. Why the collusion agreement of a cartel is difficult to maintain?
3. How the barometric price leadership works? Provide an instance.
4. How the dominant price leadership works? Provide an example.
5. Illustrate the 3 degrees of price discrimination with your own real examples.
6. Why most firms would use cost-plus pricing rather than MR=MC?
7. If average cost is constant, how cost-plus pricing gives the same result as MR=MC?
8. Why transfer pricing using external market prices helps a firm to maximize profits?
9. Based on your own experience as consumer provide instances that illustrate some of price skimming, penetration pricing, limit pricing, predatory pricing, prestige pricing and psychological pricing.
Chapter 11:Game Theory and Asymmetric information
1. What is game theory and give an example of a real game you played lately.
2. Define and give an example of zero-sum games and non-zero sum games (cooperative and non-cooperative)
3. Explain how Company A and Company B in Figure 11.3 follow their dominant strategies to maximize revenue, but the outcome is not optimum.
4. Do you think the Prisoner’s Dilemma game is relevant for managerial decisions?
5. What would you suggest to break the Prisoner’s Dilemma outcome in the game of Figure 11.3? Hint: repetition in page 431
6. Explain how game theory can help managers to make managerial decisions. Hint: PARTS framework.
7. How we find the adverse selection problem in Craig’s List? How can we minimize that problem?
8. Have you experienced moral hazard situations? Explain the situation and how it could be minimized
9. Describe your own labor market experiences of market signaling
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