Fall 2011 ECO 211 – Microeconomics Yellow Pages ANSWERS Unit 3 Mark Healy William Rainey Harper College E-Mail: [email protected] Office: J-262 Phone: 847-925-6352 1
Four Market Models CHARACTERISTIC PURE COMPETITION (Ch. 8-9) MONOPOLISTIC COMPETITION (Ch. 11) OLIGOPOLY (Ch. 11) MONOPOLY (Ch. 10) Number of Firms: Very many Many Few One Type of product: Standardized Differentiated Standardized or Differentiated Unique; no close substitutes Control over price: None; they are price takers; demand facing the firm is perfectly price elastic Little; it depends on product differentiation Some, but limited by mutual interdependence Considerable Conditions of entry: Very easy; No barriers Relatively easy Significant barriers Blocked Nonprice competition None A lot Typically a lot, especially with differentiated products Public Relations type advertising Examples: Agriculture Retail trade, Restaurants, Manufactured Ice, Plastic Pipe, Book Publishing. Automobiles, cigarettes, breakfast cereal, beer, soaps and detergents, refrigerators, roasted coffee, copper, flat glass Public utilities: (gas, electric, water; Western Union), Wham- O (Frisbees), and the DeBeers diamond syndicate are "near" 2
Quick Quiz – Product Market Models 1. Economists would describe the U.S. automobile industry as: 1. purely competitive.2.an oligopoly.3. monopolistically competitive.4. a pure monopoly. 2. In which of the following market structures is there clear-cut mutual interdependence with respect to price-output policies? 3. Which of the following industries most closely approximates pure competition? 4. Economists use the term imperfect competition to describe: 5. In which of the following industry structures is the entry of new firms the most difficult? 1.pure monopoly2. oligopoly3. monopolistic competition4. pure competition 6. An industry comprised of 40 firms, none of which has more than 3 percent of the total market for a differentiated product is an example of: 4
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