# hw 4 2.docx - 1 A market structure characterized by many...

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1. A market structure characterized by many sellers with each having some pricing power and product differentiation is best described as: 1. oligopoly. 2. perfect competition. 3. monopolistic competition. Monopolistic competition is defined by many sellers, differentiated products, and pricing power. 2. A market structure with relatively few sellers of a homogeneous or standardized product is best described as: 1. oligopoly. 2. monopoly. 3. perfect competition. Oligopoly: few sellers of a homogeneous or standardized products. 3. Market competitors are least likely to use advertising as a tool of differentiation in an industry structure identified as: 1. monopoly. 2. perfect competition. 3. monopolistic competition. Under perfect competition, there is no advertising for differentiation. 4. Upsilon Natural Gas, Inc. is a monopoly enjoying very high barriers to entry. Its marginal cost is \$40 and its average cost is \$70. A recent market study has determined that the price elasticity of demand is 1.5. The company will most likely set its price at: 1. \$40. 2. \$70. 3. \$120. MR=MC=40 MR=price* 1/(1-1/1.5)=40 P=120 Use this information for question 5. The demand schedule in a perfectly competitive market is given by: P = 93 - 1.5Q (for Q ≤ 62) The long-run cost structure of each company is: Total Cost: 256 + 2Q + 4Q 2

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Average Cost: 256/Q + 2 + 4Q Marginal Cost: 2 + 8Q 5. New companies will enter the market at any price greater than: 1. 8 2. 66 3. 81 In a perfectly competitive market, MC=AC=P 2+8Q=256/Q + 2 + 4Q Q=8 MC=2+8Q=66 6. Companies most likely have a well-defined supply function when the market structure is: 1. oligopoly. 2. perfect competition. 3. monopolistic competition. Under Perfect competition, firms are price-taker. They cannot decide price. The market decides.

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