Unit 11Imperfect Competition 1 Identify the three types of i

Unit 11—Imperfect Competition

1) Identify the three types of imperfect competition and list five characteristics of each form of competition

A:

B:

C:

1

2

3

4

5

2) Why are monopolists price-makers while firms in perfect competition are price takers?

Questions 3-5 refer to the following: For many years Keurig held a patent on the design of the K-Cup, which prevented other firms from making pods that would work with Keurig coffee makers. The demand, marginal revenue, and marginal cost curves are drawn below.

3) Find the marginal benefit curve and identify the efficient price and quantity. Why is this combination of price and quantity efficient?

4) What is the price and quantity if Keurig acts as a monopolist?

5) Shade in consumer surplus, producer surplus, and deadweight loss when Keurig is a monopolist. Does the monopoly increase total surplus or decrease total surplus?

6) Give two reasons why monopolies can make society better off

Multiple choice questions:

1.   Which of the following is a characteristic of a monopoly?

         a.    The firm produces a product that has many close substitutes.

         b.    There are barriers to entry in the market.

         c.    The firm has no control over price.

         d.    The firm\'s demand curve is perfectly elastic.

2.    Assume someone organizes all bread producers in the nation into a monopoly.

         Which of the following will occur?

         a.    Consumer surplus decreases and deadweight losses are created

         b.    Deadweight losses are created and economic profit increases

         c.    Consumer surplus decreases and economic profit increases

         d.    Consumer surplus decreases, deadweight losses are created, and economic profit increases

3.    A monopolist can make an economic profit in the long run because of

         a.    the many firms that produce in the market.

         b.    product homogeneity.

         c.    barriers to entry.

         d.    the perfectly inelastic demand curve that it faces.

	A:	B:	C:
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2
3
4
5

Plot Area Marginal Revenue Demand Marginal Cost 10 Quantity

Solution

ans 1)The 3 kinds of imperfect competition are-monopoly;monopolistic competition; oligopoly

Market form

Number of firms

Kind of product

Power of producer over the pricing

Hurdles to entry

Non-pricing competition

Monopolistic competition

several

Differentiated

Some

Low

Advertising ; product differentiation

Oligopoly

Few

Differentiated/standardized

Some

High

Advertising ;product differentiation

monopoly

single

unique

substantial

Extremely high

advertising

Market form	Number of firms	Kind of product	Power of producer over the pricing	Hurdles to entry	Non-pricing competition
Monopolistic competition	several	Differentiated	Some	Low	Advertising ; product differentiation
Oligopoly	Few	Differentiated/standardized	Some	High	Advertising ;product differentiation
monopoly	single	unique	substantial	Extremely high	advertising