Colander Micro Chapter 13

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					ECON 2010                Note Templates for Colander’s Microeconomics                   Dr. Tufte


     Chapter 13: Monopolistic Competition,
       Oligopoly, and Strategic Pricing 297
     What are the two feature of market structure?
     What are the characteristics of monopolistic competition?
     What are the characteristics of oligopoly?
            The Problems of Determining Market
              Structure 297
            How can market structure vary by location?
            How can market structure vary by definition of the industry?
                  Classifying Industries 298
                  What is Sherer’s rule for determining which firms are in an industry?
                  Does a cross-price elasticity of more than 3 indicates substitutes or
                         complements?
                  What is the North American Industry Classification System?
                  This classification system gets finer when the number of digits does what?
                  Which digits – those on the left or on the right – correspond to broader
                         industries?
                  Determining Industry Structure 299
                  How is a concentration ratio calculated?
                  How is a Herfindahl index calculated?
                  Are industries more concentrated if these numbers are bigger or smaller?
                  Conglomerate Firms and Bigness 300
                  Do these numbers tell us much about the size of a firm?
                  The Importance of Classifying Industry
                     Structure 300
                  It’s important to classify firms because strategic decision making is more
                         realistic for a manager if the number of firms is small or large?
                  Which market structure is characterized by strategic decision making?
                  Which market structures are not characterized by strategic decision making?
                  Which is more predictable, a market with or without strategic decision making?
            Characteristics of Monopolistic
              Competition 300
            How many characteristics are there?
                  Many Sellers 301
                  This is a critical assumption because it makes what more difficult?
                  Is this the assumption that makes this market structure behave more like
                          monopoly or competition?



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ECON 2010                Note Templates for Colander’s Microeconomics                    Dr. Tufte


                  Product Differentiation 301
                  Is this the assumption that makes this market structure behave more like
                          monopoly or competition?
                  Is differentiation an idea that has to be “sold” to customers?
                  Multiple Dimensions of Competition 302
                  Along what dimension do firms compete in perfect competition?
                  Along what other dimensions do firms compete in monopolistic competition?
                  How do you determine how to compete along those dimensions?
                  Ease of Entry of New Firms in the Long
                     Run 302
                  If there isn’t free entry, what will you have instead of monopolistic competition?
            Output, Price, and Profit of a
              Monopolistic Competitor 302
            Does a monopolistic competitor face a horizontal or downward sloping demand
                   curve?
            Does a monopolistic competitor face a horizontal or downward sloping marginal
                   revenue curve?
            Free entry and exit forces profits for a monopolistic competitor to what value?
            This implies that ATC will intersect demand in what way?
                  Comparing Monopolistic Competition
                    with Perfect Competition 303
                  Firms in which market structure set their prices above marginal cost?
                  Firms in which market structure produce at their minimum average total cost?
                  Firms in which market structure want to get larger to be more efficient?
                  Comparing Monopolistic Competition
                    with Monopoly 305
                  The big difference between these two forms of market structure is the position of
                        what curve?
                  Where should that curve be for monopolistic competition?
                  Where should that curve be for monopoly?
                  In which market structure can economic profits be sustained?
                  Advertising and Monopolistic
                     Competition 305
                  Why doesn’t a perfect competitor advertise?
                         Goals of Advertising 305
                         The goal of advertising is to shift demand which way?
                         Is the goal of advertising is to make demand more elastic or inelastic?
                         Advertising also shifts which cost curve up?


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ECON 2010                Note Templates for Colander’s Microeconomics                     Dr. Tufte

                         Why doesn’t advertising effect average variable costs?
                         Does Advertising Help or Hurt Society 305
                         Is product differentiation somewhat wasteful?
                         How is this shown on a graph?
                         What did Chamberlin say about differentiation?
                         What was Robinson’s original name for monopolistic competition?
            Characteristics of Oligopoly 306
            How many firms are there in an oligopoly?
            Do they sell a differentiated or undifferentiated product?
            Models of Oligopoly Behavior 306
            Is there a single model of oligopoly?
            How many models of oligopoly are there?
            How many models of oligopoly are presented in this text?
            What makes oligopoly so hard to model?
                  The Cartel Model 306
                  What is a cartel?
                  The cartel model of oligopoly says that an oligopoly will try to unite and act like
                         a what?
                  A cartel is more profitable because it does what to quantity?
                  Is explicit collusion legal in the U.S.?
                  Is implicit collusion legal in the U.S.?
                  Can a cartel arise because most firms follow the leader?
                         Implicit Price Collusion 307
                         What is a price leader?
                         Why do some firms price the same way as their competitors?
                         Cartels and Technological Change 307
                         Does technological change help or hurt cartels?
                         Why Are Prices Sticky? 308
                         What is an alternative to implicit collusion to explain sticky prices?
                         What is the shape of the demand curve in this case?
                         What is the shape of the marginal revenue curve in this case?
                         Does this mean that all changes in marginal cost will be followed by
                               changes in price and quantity?
                  The Contestable Market Model 309
                  This model is all about what feature?
                  Comparison of the Contestable Market
                    Model and the Cartel Model 309
                  If barriers to entry are high do oligopolists behave like perfect competitors?
                  If barriers to entry are low do oligopolists behave like perfect competitors?
                  Are there countries in which collusion is legal?
                  What happens to prices in those countries?


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ECON 2010                Note Templates for Colander’s Microeconomics                      Dr. Tufte


                  Strategic Pricing and Oligopoly 309
                  What factors are important in strategic pricing?
                         New Entry As a Limit On Cartelization 309
                         Is it easier or hard to price above marginal cost – as a cartel does – if
                                 there is free entry?
                         Does free entry makes demand more elastic or inelastic?
                         Price Wars 310
                         What is predatory pricing?
            Game Theory, Oligopoly, and Strategic
              Decision Making 310
            What is game theory?
            What is the prisoner’s dilemma?
            What is the way out of the prisoner’s dilemma?
                  Prisoner’s Dilemma and a Duopoly
                     Example 311
                  What is a duopoly?
                  Collusion isn’t likely to be successful because the optimal strategy of each play er
                         is to do what?
                  Duopoly and a Payoff Matrix 313
                  Cheating pushes payoffs to oligopolistic firms to what level?
                  Oligopoly Models, Structure, and
                     Performance 314
                  What is limit pricing?
            Conclusion 316




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